Below is categorized information that will give you a better understanding about title insurance and the closing process. You can click on any of the links and questions below to be taken to the corresponding section or you can scroll down to read all of them.
What is a title?
A title is the foundation of property ownership. It is the owner’s right to possess and use the property.
How should I hold title to my new property?
There are several ways that property can be owned:
Sole owner: You own the property in your own name.
Tenants in common: Two or more people own property together. Under a tenant in common arrangement, each owner has a divisible interest in the property. Although most tenant in common ownerships are split equally (i.e., 50-50 ownership), there is no legal requirement that it has to be this way. Often, there are financial or other considerations that dictate a different ownership split — for example, 90-10 or 75-25.
In a tenant in common ownership, on the death of one owner, the deceased person’s percentage ownership is part of his or her estate. The property interest does not transfer to the surviving owner. If there is a will, that portion of the property is distributed in accordance with the instructions in the will. If the person dies intestate (i.e. without a will), then the laws of the jurisdiction where the person lived control the distribution.
What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller’s right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property.
What kind of problems can a title search reveal?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Are there any problems that a title search cannot reveal?
Yes. there are some “hidden hazards” that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Other “hidden hazards’ include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you’ve purchased your home and can jeopardize your right to ownership.
What is title insurance and why do I need it?
We at A-1 Title & Escrow would like to take a moment to inform you of some of the procedures and requirements you will encounter as a Seller or Borrower. In most counties, it is the responsibility of the Seller/Borrower to provide at closing, a Title Insurance policy on the contracted property.
Title Insurance affords protection from past events which may or may not be a part of the public records, but that can adversely effect a new owner’s interest in the property being sold to them. Title Insurance protects against matters of public record, plus hidden title defects, such as fraud, forgery, incompetence or missing heirs, that even the most diligent title search may not discover.
Some states closely regulate rates. Others permit open competition, often resulting in significant differences between title insurers on rates and coverage. Depending where you live, it pays to investigate your options carefully in order to obtain the most complete coverage.
Why is transferring a title in real estate different from transferring the title to other items, such as a car?
Because land is permanent and can have many owners over the years, various rights in land may have been acquired by others (such as mineral, air, or utility rights) by the time you come into possession of it, even if the land has never before been built upon. So, in order to transfer a clear title to a piece of land, it is first necessary to determine whether any rights are outstanding.
What does title insurance protects against?
Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:
- False impersonation of the true owner of the property
- Forged deeds, releases or wills
- Undisclosed or missing heirs
- Instruments executed under invalid or expired power of attorney
- Mistakes in recording legal documents
- Misinterpretations of wills
- Deeds by persons of unsound mind
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes
How does title insurance protect my investment if a claim should arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense—and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
What is the danger of loss?
If the lender has title insurance protection and the owner does not, what possible danger of loss exists?
As an example, assume real estate was purchased for $100,000. A down payment of $20,000 is made, and a lender holds an $80,000 mortgage lien, or beneficial interest. The lender acquires title insurance protecting the lender’s interest up to $80,000. But the purchaser’s down payment of $20,000 is not covered.
What if some matter arises affecting the past ownership of the property? The title insurance company would defend and protect the interest of the lender. The purchaser, however, would have to assume the financial burden of his or her own legal defense. If the defense is not successful, the result could be a total loss of title.
The title insurance company pays the lender’s loss and is entitled to take an assignment of the borrower’s debt. The purchaser loses the down payment, other equity in the property that may have accumulated, and the property. And the balance on the note is still due!
How much does title insurance cost?
Probably a lot less than you think. Charges vary in different sections of the country, but generally the cost of title insurance (including search, examination and related services) amounts to about one percent or less of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only, usually at settlement.
What is a closing?
Closing, which is also known as “settlement” or “escrow,” is the event where the title to a property is transferred from seller to buyer. Closing is typically held in an office, such as that of an attorney, title agent or title insurance company, and involves the completion of all the necessary paperwork to finalize the agreement between buyer and seller. In addition, all financial issues are settled at closing—closing costs—and once the title is successfully transferred, the necessary documents are prepared, signed, and filed with local authorities.
What do I need to bring to closing/settlement?
First and foremost you need to bring a smile. Our goal at A-1 Title & Escrow, Inc. is to ensure that you leave with a smile too. You will also need to bring a valid government issued picture ID such as a Driver’s License, Passport, or Military ID. Additionally, if you are bringing money to the closing, these funds will need to be “certified funds.” Certified funds can come in the form of a cashier’s check, teller’s check, money order, certified check, or wire-transferred funds. In certain instances, you may also be required to bring additional documents, in which case, we will inform you in advance.
How long will the closing/settlement last?
Typically, a refinance will last between 20 and 50 minutes and a purchase and sale transaction will last 45 minutes to 1 1/4 hours.
How far in advance should I contact A-1 Title & Escrow, Inc. to handle my settlement?
If you are purchasing, you should contact A-1 Title & Escrow, Inc. prior to executing the contract so that our real estate attorneys on staff can provide a gratuitous review of your proposed contract. This will ensure that you do not pay unnecessary charges hidden in some contracts. By contacting us as early as possible, you allow us adequate time to obtain title/abstract documentation on the subject property and clear any outstanding “clouds on title” prior to your contracted settlement/closing date. Additionally, we can better coordinate the closing/settlement with all parties involved including the sellers, purchasers, real estate professionals, and lenders.
If refinancing, you should contact us after you submit your loan application. Do not wait for final loan approval, as the time between your loan approval and closing is often very short. By scheduling with us early, you allow us time to obtain the necessary title/abstract documentation, clear any title issues, obtain payoffs from your current lender, and coordinate closing with your new lender.
What if I can not attend closing/settlement?
In certain circumstances, a “power-of-attorney” can be prepared for you. A “power-of-attorney” is a legal instrument which allows another to sign legal documents on your behalf. Please give one of our attorneys or closing staff a call to see if this is an option that can work for you.
Who attends closing/settlement?
A “purchase and sale closing” is conducted by one of our competent and experienced attorneys or closing agents and is typically attended by the seller, purchaser, and their respective real estate professionals. A “refinance” closing/settlement is typically attended only by the borrower(s) and our attorney and/or closing agent.
What are closing costs?
Closing costs are all costs required to close the real estate transaction. They can include (but are not limited to) surveying fees, property taxes, title insurance, attorney fees, agent fees, points, loan origination fees, primary mortgage insurance (PMI), and the balance of your down payment. Prior to closing, you should review your final closing statement or HUD-1 Statement (whichever is in use) to ensure that all the calculations are correct and that you have been given all the credit for deposits and other agreed upon buyer and seller credits. Also recheck all lender, title, and escrow fees to make sure they are accurate.
When can I find out how much money I need to bring to closing/settlement?
Since we rely on third parties such as lenders to provide us with instructions, information, and loan figures for your closing, we often cannot furnish to you the exact amount that you must bring to closing until the day before, or sometimes, the day of closing. However, you should be able to generally rely on your lender’s or your realtor’s good faith estimate for the approximate amount of money you need to bring to closing. If you happen to bring more funds than necessary, we will refund back to you any excess amount upon completion of the closing.