It’s been a little over a year since the Virginia Bureau of Insurance (“BOI”) issued a letter that rocked the world of settlements. While the letter did not create any new law (and indeed just restated a law that was already on the books), it did alter the way some settlement companies were doing business in various parts of the commonwealth.
To recap, the BOI issued a letter and accompanying FAQ document clarifying that there is only one settlement agent, identified by the buyer, who is responsible for all “escrow, closing, or settlement services” as listed in Virginia Code § 55.1-1000. Those services are defined as the “administrative and clerical services required to carry out the terms of contracts affecting real estate,” such as ordering payoffs and preparing closing disclosures or settlement statements.
The settlement agent is responsible for these duties under the law, but the BOI also indicated in its FAQ document that the settlement agent may “oversee and engage one or more third parties [to perform] administrative and clerical services on its behalf.” The FAQs are clear that in this situation, no matter who is actually performing the services, the settlement agent has the ultimate responsibility in making sure these services are performed properly.
Where does that leave the seller in a transaction? The settlement agent represents the transaction, not the buyer, but as the buyer has the ultimate choice of settlement agent, many sellers want their own representation. The BOI letter was clear that sellers could still freely retain an attorney of their choosing, and a bill passed by the General Assembly last year put that in the code as well. The settlement agent can allow the seller’s attorney to prepare the deed in the transaction or assist in an of the other escrow services if the settlement agent chooses.
As a listing agent, you can inform your clients that while they may retain an attorney to represent them in the transaction, the settlement agent will have the ultimate say regarding who can perform any settlement-related services as defined by the Code. You should also remind them that while the settlement agent is chosen by the buyer, technically they do not represent either side and must exercise reasonable care when overseeing the transaction.
If you have any questions on settlement-related matters, contact the Virginia REALTORS® Legal Hotline.