- What is a Title?
- What is Title Insurance and Why Do I need It?
- What types of claims, or risks, are generally covered by title insurance?
- Why is transferring a title in real estate different from transferring the title to other items, such as a car?
- What is a Title Search?
- What is a Prior Owner’s Policy?
- What is the Initial Title Report?
- What is a Property/Real Estate Survey?
- If the note is only in my name, why does my spouse have to sign the mortgage?
- What items are needed at closing?
- What if I am unable to attend the closing?
- Why do I need homeowners and/or Flood Insurance?
- If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?
- What are endorsements?
- What is a homestead exemption?
A title is the foundation of property ownership. It is the owner's right to possess and use the property.
What is Title Insurance and Why Do I need It?
Title insurance protects the owner and lender by providing insurance coverage against loss resulting from claims by others that may attach to your home or real estate investment.
What types of claims, or risks, are generally covered by title insurance?
• Forgery and impersonation;
• Lack of competency, capacity or legal authority of a party;
• Deed not joined in by a necessary party (i.e. co-owner, heir, spouse,
etc.);
• Undisclosed (but recorded) prior mortgage or lien;
• Undisclosed (but recorded) easement or use restriction
• Erroneous or inadequate legal descriptions
• Lack of a right of access; and
• Deed not properly recorded.
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.
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 is a Prior Owner’s Policy?
The prior policy
is the Owner's policy that is given to the homeowner after purchasing
the home. The policy remains in effect for as long
as they own the property, regardless of refinancing or loans being paid
in full. Prior policies must be presented to the title company for
all refinance and purchases. This lets the title company know that the
property's title is free of defects up until the day the current owner
purchased the property, therefore the search will begin from that day
forward. If a prior policy cannot be found the property's chain of title
must be searched for a period covering the last 30 years.
If the transaction is a refinance the prior policy may entitle the owner
to a re-issue credit (discount) on the closing statement. The prior policy
must be the same as those involved in the current transaction; the prior
policy does not need to be issued by the same company that is issuing
the new policy for a reissue credit to apply. Only an Owner's Policy
may be used for a prior policy. Commitments and Loan Policies are not acceptable.
A lender’s title insurance policy does not protect you. Similarly, the prior owner’s policy does not protect you. If you want to protect yourself from claims by others against your new home, you will need an owner's policy. When a claim does occur, it can be financially devastating to an owner who is uninsured. If you buy an owner's policy, it is usually much less expensive if you buy it at the same time and with the same insurer as the lender's policy.
What is the Initial Title Report?
A few days before the settlement or closing of the escrow, the title insurance company will issue a "Commitment to Insure" or preliminary report or "binder" containing a summary of any defects in title which have been identified by the title search, as well as any exceptions from the title insurance policy’s coverage. The commitment is usually sent to the lender for use until the title insurance policy is issued at or after the settlement. You can arrange to have a copy sent to you (or to your attorney) so that you can object if there are matters affecting the title which you did not agree to accept when you signed the agreement of sale.
What is a Property/Real Estate Survey?
Lenders or home title insurance companies often require a real estate survey to mark the boundaries of the property. A survey is a drawing of the property showing the perimeter boundaries and marking the location of the house and other improvements. You may be able to avoid the cost of a complete property survey if you can locate the person who previously surveyed the property and request an update. Check with your lender or title insurance company on whether an updated survey is acceptable. Surveys are not required for condominiums. From time to time a survey may be needed for a town house or villa.
If the note is only in my name, why does my spouse
have to sign the mortgage?
If the property is going to be the primary residence
of the married couple, then it is necessary for your spouse to sign
in acknowledgement that he/she knows that the property is being encumbered
and that there is a note that needs to be paid by the borrowers' heirs.
In short, someone has to keep on paying the mortgage until it is paid
in full.
What items are needed at closing?
You will want to have these items complete or in hand when you come to the closing (please confirm with your escrow officer prior to closing):
Buyer:
- Buyer's copy of purchase agreement
- Cashier's check(s) to make all payments
- Proof of purchase of insurance for fire, casualty, etc.
- Invoices for any unpaid taxes, utilities or assessments
- Two forms of identification, one of which must be a valid photo identification (passport, driver's license, or state-issued identification card)
Seller:
- Seller's copy of purchase agreement
- Invoices for any unpaid taxes, utilities, assessments, and latest utilities meter readings
- Receipts for last payment of interest on mortgages
- Bill of Sale of personal property covered by the purchase agreement
- Any unrecorded instruments that affect the title
- Proof of satisfaction of any mechanics' liens, chattel mortgages, judgments, or mortgages that were paid prior to the closing
- Two forms of identification, one of which must be a valid photo identification (passport, driver's license, or state-issued identification card)
What if I am unable to attend the closing?
Closing documents can be pre-signed, mailed, faxed or e-mailed to you prior to closing.
Why do I need homeowners and/or Flood Insurance?
If you are getting a mortgage on the property it is a requirement of the lender that you have insurance on the property. Insurance will need to be obtained as soon as possible. Paid receipts are to be faxed to our office. If you are purchasing a condo, townhouse or villa, please check with your Homeowners or Condo Association to see if insurance is included with the association dues. Many properties are located in a flood zone. If you are getting a mortgage and your property is in a flood zone, you must have flood insurance. Through the survey company, we will provide your insurance agent an elevation certificate which is necessary to determine your flood insurance premium.
If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?
The lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender's ability to foreclose and recover its principal and interest. And, in the event of a claim there is no provision for payment of legal expenses for an uninsured party.
What are endorsements?
An endorsement is an addition to or modification of a title insurance
policy that expands or changes the coverage of the policy, fulfilling
specific requirements of the insured. Most lenders require endorsements
as a condition of the loan to further protect their interest.
