Have you ever heard the term “split closing” and wondered what it meant? While it’s not a common practice, it’s been popping up more frequently in the greater Lansing area over the past year. So, let’s take a closer look at what this process entails and when it might be used.

What is It?
Under Section 9 of the Real Estate Settlement Procedures Act, a buyer and seller have the right to pick their own title agency to complete the settlement of a real estate purchase. A split closing happens when a buyer and seller each use their own separate agency to close their side of the transaction.

Choosing a title agency is often based on a relationship or preference that the buyer and/or seller has from a previous service or transaction, a referral, or a personal relationship that comforts the client during the closing process. 

How Does it Work?
In a split closing, each title agency independently searches and compiles the historical data for the property and formats it into a title commitment. The two agencies then collaborate to ensure all information and documentation is sufficient to insure the property upon transfer. 

“This all happens behind the scenes and the parties involved – buyer, seller, REALTORS^® – should not experience any variations from the typical one agency transaction,” said Robyn Dinsdale, vice president of residential operations for Diversified National Title. “The key to a seamless process is clear communication and collaboration between the two agencies.”

There are a few variations of a split closing. In one method, the closing is handled by two title agencies, but everyone closes at one location at the same time so the parties can be together. However, if the buyer and seller prefer, a split closing can also be handled at each of the separate agencies. Another option is for the two agencies to conduct the settlement at one location, but the buyer and seller close at different times.

What Are the Pros and Cons?
Dinsdale says with a split closing each party may have greater flexibility in choosing the time, location, and day of closing to fit their schedule.

“The buyer or seller may benefit because of a relationship, trust factor, or ease of the process,” she said. “There is also the advantage of having two title agencies doing the work on the same property, which helps ensure nothing is missed.”

As far as any drawbacks, there can potentially be a delay in funding due to the collaboration of documents or funds between lenders and title agencies, and some buyers and sellers may prefer closing together in order to interact and ask questions.

Dinsdale says there is a misconception that it costs more to have two agencies involved, but she stresses that the Greater Lansing Association of REALTORS^®’ purchase agreement is very clear on how costs are allocated and what is allowed. Because of this, Lansing area title agencies do not add additional fees for a split closing.

“There are still many that steer away from this practice because of a bad experience or lack of knowledge surrounding the process,” said Dinsdale. “Until individuals fully embrace the shift of the industry, there will continue to be controversy surrounding this practice.”  

Dinsdale says that a split closing does not create any additional work for agents or their clients because experienced title agencies in the area have already gone above and beyond to meet these new standards and streamline the process.

“All parties in a real estate transaction want a smooth, professional, and timely completion of the contract,” she said. “The real estate industry is constantly changing and as professional title agents, we strive to be one step ahead of the curve to exceed our customers’ expectations.