Settlement
Settlement is the closing of a real estate transaction: the administrative and clerical work that carries out the purchase contract. Virginia's statute lists that work, from ordering title insurance and receipting the parties' money to the signing, the disbursement of funds, the recording of documents and the report of the sale to the IRS.
Clerical work that carries out a contract
Closing, settlement and escrow are three words for overlapping pieces of one job, and the Code of Virginia defines them together. Chapter 10 of Title 55.1, Real Estate Settlement Agents, puts it this way:
"Escrow, closing, or settlement services" means the administrative and clerical services required to carry out the terms of contracts affecting real estate.
Va. Code 55.1-1000
The point of the definition is its modesty. Settlement does not write the deal. The buyer and seller have already done that in the purchase contract; settlement is the work of carrying it out. The same section defines escrow as written instruments, money or other items deposited with a settlement agent for delivery to others once specified conditions are performed or a certain event happens. A signed deed a settlement agent holds until the buyer's funds arrive fits that description.
The contract language Chapter 10 prescribes describes the person in the middle as coordinating "numerous administrative and clerical functions relating to the collection of documents and the collection and disbursement of funds required to carry out the terms of the contract between the parties." Who may take on that role, and what the statute requires of them, belongs to the entry for settlement agent.
One limit on reach is worth knowing on land. Except as its subsection B provides, Va. Code 55.1-1002 A applies the chapter only to purchase or lending transactions on Virginia real estate containing not more than four residential dwelling units, while a registered lay settlement agent may serve any real property in Virginia. Whether a particular vacant-land or commercial sale falls inside the chapter is a question for an attorney.
Orders and receipts: title, payoffs, surveys and the statement
Va. Code 55.1-1000 goes on to list what the services include. The list is longer than the items below; these are its preparation side.
Title insurance
Placing orders for title insurance.
Money in
Receiving and issuing receipts for money received from the parties.
Loans
Ordering loan checks and payoffs, including the payoff of any debt secured against the property.
Surveys and inspections
Ordering the surveys and inspections the transaction calls for.
The statement
Preparing the settlement statement or closing disclosure that accounts for the money in and out.
Chapter 10 defines a settlement statement as the statement of receipts and disbursements for the transaction. What the lines on one mean, who is named on it, and which form a given sale uses, is the subject of what a settlement statement is.
The conference, the money, the recording and the report to the IRS
Later in the same list come the items people picture when they hear the word closing, and the ones that keep going after everyone has left the table.
- Conducting a closing conference at which the documents are executed.
- Receiving and disbursing funds, so the seller is paid, the payoffs are sent and the charges on the statement are covered.
- Handling or arranging for the recording of documents in the land records.
- Sending recorded documents to the lender.
- Sending the recorded deed and the title policy to the buyer.
- Reporting federal income tax information for the sale to the Internal Revenue Service.
Recording is the step with the most weight behind it: until it happens, Va. Code 55.1-407 leaves a deed or deed of trust void as to purchasers for value without notice and lien creditors, which is why a settlement is not finished when the pens go down.
The list itself sets no calendar. How long the stretch from contract to recorded deed runs on a land sale depends on title, survey, lender and county review, all taken up in how long closing takes on land. Who does each piece of the work at a Virginia settlement, in procedure from contract to deed book, is laid out in settlement in Virginia.
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Questions about this term
Does a buyer leave the settlement table holding the recorded deed?
Not as the statute describes the work. The services listed in Va. Code 55.1-1000 include handling or arranging for recording and then sending the recorded deed and the title policy to the buyer, so the recorded deed reaches the buyer after the clerk's office has recorded it. How long that takes at a given clerk's office is a question for the settlement agent handling the file.
Is a settlement just the signing appointment?
No. The signing is one item in the statutory list. Va. Code 55.1-1000 describes settlement services as the administrative and clerical work of carrying out the contract, and the services it lists include ordering title insurance, receipting the parties' money and ordering payoffs, surveys and inspections, and reach past the signing to recording, sending out the recorded papers and reporting the sale to the Internal Revenue Service.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Va. Code 55.1-1000: definitions for Real Estate Settlement Agents Code of Virginia
- Va. Code 55.1-1002: scope of the chapter Code of Virginia
- Va. Code 55.1-1007: required contract language on the settlement agent's role Code of Virginia
- Va. Code 55.1-1008: settlement statements in writing Code of Virginia
- Va. Code 55.1-407: instruments void as to purchasers and lien creditors until recorded Code of Virginia