Expert: Lisa Webber - 3/28/2008

Question
I am currently buying a house in Maryland. The bank we are purchasing from is refusing to give us the keys at settlement untill the bank we are borrowing from gives them the money. This is to take appx 3 days. We have a pre-approved loan. Is this legal?

Answer
I think I understand your question.  Let me tell you what normally happens.

Basically what happens is you will go through your bank to get a loan, filling out all the paperwork for your lender.  The lender will put together the loan package, get an appraisal on the home, termite inspections, etc., and give the package to the underwriter.  The underwriter will decide whether you will get the money or not.  The process can take anywhere from 7-10 days or more depending upon the loan.  Once the underwriter approves the loan, they will generate the settlement package with the HUD 1 which will show you all of the charges to the buyer and seller.  All of this information goes to the title company.  Sometimes the title company will get the information the day before settlement or sooner, sometimes not until the day of settlement.  The wire transfer is also ordered for the money to go from the bank to the title company so it can be disbursed to everyone.  At settlement you'll sign the HUD 1 statement and all of the other paperwork pertaining to the loan, plus you'll sign the deed.  The sale is not final until the paperwork is signed and the money gets to the title company and is given out to everyone.  At this time you'll get your keys.  

It sounds like you went to a "dry settlement" in which you signed all of the paperwork but the wire didn't come through to the title company yet, so the money is not in their account.  If the wire did not get ordered by the lender by 1:00pm today (Friday), then it will not be in the title companys account until Monday which is the next business day.

The bank is being cautious and wants to make sure they are getting their money as the transaction has not been completed until they have the money. Normally you would not go to settlement without the money either in or on the way so this is a bit of an unusual situation.  I'm not sure why they had you come in and sign all of the paperwork when the money was not in yet?  

Normally you would receive your keys at settlement.  I'm sure it's the banks policy to not hand over the keys until the transaction is complete, which it is not yet.

It's not really a question of legality because the transaction has not been completed.

I hope this helps to answer your question.  Please feel free to ask for clarification or ask anything else that I might be able to answer for you.  Good luck to you!