WHAT IS TITLE?
Title grants ownership rights to a piece of real property; meaning the title owner possesses the right to exclude others, occupy, possess, and sell the property.
WHAT IS TITLE INSURANCE?
Title Insurance is a contract purchased by an owner, called an owner’s policy, which guarantees good title, ensuring protection against past occurrences which could result in a claim at a future date; coverage continues so long as you, or your heirs have an interest in the insured property, or in the event that you sell the property, coverage also continues where warranties of title are given to the buyer. A contract purchased by a mortgage lender is called a mortgagee policy, and guarantees the mortgage is a lien on the property. The policy pays for costs to remove clouds and defects caused by forgery, fraud, lawsuits, unrecorded easements, and missing heirs. Title insurance provides the insured with “peace of mind” in knowing that you are receiving good and marketable title to the real estate you are purchasing.
WHY DO I NEED TITLE INSURANCE?
When you buy a property—you expect to enjoy certain benefits from ownership (I.e.: to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan). Title insurance protects these rights. Without an owner’s title insurance policy, you may not be fully protected against errors in the public records, hidden defects not disclosed by the public records, or mistakes made during the examination of the title of your new property. Accordingly, your owner’s title policy insures that if such an occasion arises, you will be defended, free of charge against all covered claims and paid up to the amount of the policy to settle valid claims.
WHAT IS A TITLE SEARCH?
A title search is a thorough examination of the public records that pertain to real property ownership and the rights/limitations of its use. The search period begins with the current owner(s) and extends back in the chain of title, for a time period of 60 years. All documents affecting the subject property are reviewed for accuracy, completeness and proper execution. Similarly, all owners of record during the search period are indexed to determine their ownership interests, marital status and legal and mental capacity to enter into a contract to sell or buy real property.
Note: A title search can show title defects, liens, and other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against buyers/sellers and any restrictions or conditions limiting the use of the land.
WHAT IS A LIEN?
A Lien is a right to sell a piece of property to pay a debt if the debt is unpaid or in default. Normally, the debt is from a mortgage, construction work, a judgment, or an IRS lien. A lien has priority to the property based on when it is recorded at the courthouse. If there is more than one lien, the one recorded first is a first lien and the next one recorded is a second lien, etc. A mortgage title policy normally insures that the mortgage is a first lien on a property and therefore entitled to sell the property to pay its mortgage, if unpaid, before any other lien holders can sell the property.
Why do we need a title policy when we refinance, if we just acquired one last year upon purchasing the PROPERTY?
You need an owner’s title policy to guarantee that no new liens have been recorded against the house in the past year (i.e.: for IRS, judgments, home improvements, second mortgages). You need a new mortgage policy because the new mortgage lender wants to be named as the first lien holder, and to have the old mortgagee removed from the title.
WHAT DOES TITLE INSURANCE COST?
The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues.
What is a Closing?
In a sale of real estate property, a Closing, is the event where the Seller signs a deed of the property and delivers the deed and keys to the Buyer, in exchange for the money agreed upon in the purchase price. Normally, the buyer also signs a mortgage (and note) to a lender, in order to obtain part of the purchase price. A Closing for a refinance, arises where the property owner signs a new mortgage (and note) to a lender to pay off and satisfy the previous mortgage. A “Settlement” is another word for “Closing” and is the preferred term in some parts of the United States.
WHAT IS A HUD-1 SETTLEMENT STAT?
This is a summary of the financial portion of the real estate transaction. The title company or closing agent is required by the Department of Housing & Urban Development to use the HUD-1 on virtually all one-family to four-family residential real estate transactions involving a lender. The statement will list the purchase price, loan amount, closing costs for the buyer and seller, and will show all sums being charged and disbursed to the parties involved. It also clearly summarizes the total amount due from the purchaser.
If I am a buyer, should I bring cash, check, or a cashier’s check to my closing, or should I wire money? Who do I wire the money to, or, make the check payable to?
You should bring a cashier’s check payable to the Closing Agent (normally the title company) in the amount of the “Cash to Close” figure furnished to you by your representative and processor at the title company. A bank wire to the title company is also acceptable and requires you to have the “Wire Instructions” from the title company. Personal checks, except for nominal amounts (under $200.00), are unacceptable at closing, because the title company must pay out immediate funds to clear all mortgages and liens off the property and must pay all broker and recording costs. Personal checks take several days before they become clear funds.