Title

Photo Credit: veganstraightedge Not all title companies are the same, and which one you choose can make a difference in your purchase. The title company plays several roles in the property acquisition process.

Title officers:

Supervise the Closing/Settlement process: As a neutral party, the title company manages the documents and funds that change hands as part of the purchase or refinance.

Conduct Title searches: The officer checks public records or ownership, sometimes going back decades, for clear evidence that the seller has the right to sell the property and collect the entire payment.

Title report: (sometimes called a Commitment to Insure) a summary of the results of the title search. They check for:

  1. Additional Ownership Claims: Other parties who might have an ownership interest in the property.
  2. Mechanic’s Liens: Claim for payment filed when the current owner refused to pay a contractor’s bill.
  3. County/State Liens: For unpaid property taxes.
  4. Zoning ordinances.
  5. Easements: The right to use another’s property for specific purpose.
  6. Pending Legal Action or Judgments.
  7. Restrictive Covenants: Legal limitations on aspects of the property’s use such as size, type or style of building allowed to be added to the property.

Offer Title Insurance to: Both lenders and buyer/owners. Title insurance protects the policy holder from disputes over the ownership of a property.

  1. Why buy it? Most insurance concerns something that happens in the future, but title insurance is about protecting you from events which occurred in the past.
  2. Your Lender Requires it: If you are borrowing money from a financial institution to purchase a property, the lender will require you buy title insurance.
  3. Potential Problems: Title companies report that 25% of transactions have some kind of defect (often called a cloud on the title).
  4. The problem could be as minor as an unrecorded easement, or as major as a husband selling joint property without his wife’s knowledge or agreement.
  5. The wife can then challenge your ownership and you could lose the property, and all the money you spend on closing costs, moving, any improvements you’ve made etc.

Lender’s Policy: The policy your lender requires you to buy protects the lender, not you the buyer. The lender wants to be sure that the property can be used for collateral for the mortgage, and that if some other owner pops up, the issuance of policy will cover both:

  1. Attorney’s Fees: For the legal battle over ownership.
  2. Financial Loss: If they can’t recover the value of the loan because the property securing the mortgage belongs to someone else.

Review the report: Even though it is designed to protect the lender, you can request a copy of the preliminary report that is prepared a few days or weeks before closing.

Buyer’s/Owners Policy: It can be a good idea to get title insurance to protect your interest in the property. If the title company makes a mistake, you could loose all of your equity in the property and be out the money for legal fees as well.

How to buy it?

  1. Lender’s Policy: Your title officer will work with your lender to set up a policy with the appropriate coverage.
  2. Buyer’s Policy: Talk to your title officer about what kind of policy makes the most sense for you.

Who pays: Who pays for the title insurance the buyer or the seller? It varies from county to county. You should ask your title officer or your real estate agent what the custom is in that area.

What is the cost?

  1. One-Time fee: You only pay once, when the policy is issued, and the policy runs for as long as you on the property.
  2. Department of Insurance: In some states, the fees are set by the state’s Department of Insurance and are not negotiable.
  3. Agent: In other states, the rates are set by the insurance agent (title officer) and can be negotiated.
  4. Transaction Amount: In both cases the cost is based on the size of the transaction ($1,000).

Basic Rate: Used for purchase transactions and based on selling price or mortgage amount.
Re-Issue Rate: Used when the seller can provide recent evidence of clear title (back title), this is usually cheaper than the basic rate.
Refinance Rate: When you are the current owner and just refinancing your loan, usually it will be less than the basic rate.

Photo Credit: veganstraightedge

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