Title and Escrow
What is title insurance?
A title insurance policy is a contract insuring the insured’s “ownership” or “interest” in a specific piece of real property. A title insurance policy insures the owner or others having an interest in the property against loss due to encumbrance, defective title or adverse claims against the title. This includes “hidden hazards,” explained below.
Why do I need title insurance?
When you buy a home, you want to be certain that it is safely yours. But even the most diligent search of the public records could fail to disclose a number of title defects such as a forged will or deed, a title transfer by someone under age, or a married person conveying real estate without his or her spouse. Fraudulent impersonations. Undisclosed heirs. Invalid divorces. False affidavits. The list of potential problems that can surface goes on. Without the protection of title insurance, you’ll be in jeopardy of losing your investment.
How long does title insurance last?
Coverage lasts as long as you or your heirs retain an interest in the real property and, in some cases, even longer.
Who pays for title insurance?
By custom, not law, the seller pays for the buyer’s Owner’s Standard Title Insurance Policy. Again by custom, the purchaser pays for the Title Insurance Policy insuring the lending institution providing the purchaser’s financing. Again this is by custom, and a buyer and seller may agree between themselves as to who should bear the cost of title insurance.
What is a title search?
A title search is a detailed examination of the historical records concerning the real property. These records include deeds, court records, property indexes, name indexes and tax records, among others. The purpose of the search is to verify the seller’s right to transfer ownership and to discover any claims, defects, rights or burdens affecting the property.
What kind of problems can be revealed?
A title search can show defects, liens, encumbrances and restrictions, such as unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Are there problems that can be missed?
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, forgery, defective deeds, mental incompetence, confusion due to similar names and clerical errors in the records. These defects can come to light after you have purchased your home and jeopardize your right to ownership.
How much could I lose if a claim is filed against my property?
That depends on the claim. In an extreme case, you might lose your entire home and property and still be liable to pay off the balance of your mortgage. Most claims are not that dramatic, but even the smallest claim can cost you time and money.
Are there different kinds of policies?
Yes. As a homeowner you have the option of choosing different types of coverage.
How do I know which policies to order?
For help in deciding which policy best suits your needs contact your title representative.
Does title insurance really protect me?
Yes. If your claim is accepted, the title insurance company may defend your title in court if necessary, at the company’s expense. Alternately, the title insurance company will indemnify you against monetary loss or damage due to covered title defects, according to the terms of your title insurance policy.
What is escrow?
Escrow is an impartial third party in which documents and funds are deposited by buyers, sellers and lenders to facilitate the closing for a real estate transaction. As a fiduciary player in the transaction, escrow is required to follow mutual written instructions from all parties.
Escrow will coordinate with the buyer, seller and lenders to obtain required signatures on all documents, work closely with the title officer to clear liens and encumbrances against the property, and record the documents with the county.
Why do I need escrow?
Escrow assures all parties to a transaction that no funds are delivered and no documents are recorded until all conditions in the transaction have been met.
How do I open escrow?
Opening escrow is the first step in the closing process. Generally, to open an escrow, the parties to a transaction deliver to an escrow company the earnest money check and the purchase and sale agreement, which outlines the transaction and provides the closing date, contingencies and financing details. Anyone involved in a transaction can “open the escrow,” but generally your real estate agent will do so. In the case of a for-sale-by-owner or FSBO, the buyer, the seller or both may open the escrow.
Who sets the closing date?
The buyer or seller may select the closing date, but both buyer and seller must agree to it. The purchase and sale agreement may state the closing date as “Closing to occur on or before August 20th, 2010.” In most cases, closing occurs 30, 60 or 90 days from the date a purchase and sale agreement is signed.
What do closing costs include?
The closing costs will include title search fees, taxes, notary fees, loan fees, escrow fees, recording fees, reconveyance fees, the real estate sales commission and other miscellaneous charges.
Who selects the escrow company?
The parties involved in the transaction decide which escrow company will close the transaction. Although it is very common for your real estate agent to recommend an escrow closer, the parties have the right to choose an escrow closer they feel is competent and experienced. The law prohibits escrow companies from paying referral fees to real estate agents, to protect the parties’ right to select their own escrow closer.