Role of A Title Company

Role of A Title Company

Now that you've decided to buy a home, what happens between now and the time you legally own it? The next step is to obtain title for the property from the title company. A title gives the owner the right to possess and use the property. But before receiving title, the title company will need to complete the following:

Earnest money: To show the seller and his agent you are a serious buyer, you will be asked to give the title company a deposit called earnest money. If the sale goes through, the earnest money is applied toward the down payment. If the sale falls through, the earnest money will not be given back unless it is stated in the offer to purchase that it is refundable.

Title search: A title search is a thorough check of the records concerning the property. It is performed to verify the seller's right to change ownership. A title search will uncover any demands, faults, liens and other privileges or restrictions on the property.

Document preparation: Appropriate forms are prepared for settlement.

Settlement: Many events happen during settlement. The seller signs the deed, the buyer signs the new mortgage, the old loan is paid off and the new loan is established. The seller, real estate professionals, attorneys, surveyors and others performing services for the parties are paid. Title insurance policies are then delivered to the buyer and their lender.

Title Insurance

Owning real estate is one of the most precious values of freedom in this country. Get the assurance that the property you are buying will be yours. Other than your mortgage holder, no one else should have any claims or restrictions against your home.

Title insurance eliminates any risks and losses caused by faults in title from an event that occurred before you owned the property.

How does title insurance differ from other types of insurance?

Title insurance is different from other types of insurance in that it protects you, the insured, from a loss that may occur from matters or faults from the past. Other types of insurance such as auto, life or health cover you against losses that may occur in the future. Title insurance does not protect against any future faults.

Another difference is that you pay a one-time premium. A title insurance policy will protect you from risks or undiscovered interests.

Policy Types

There are two principal forms of title insurance:

1. The lender's policy

2. The homeowner's policy

What is a lender's policy?
A lender's policy protects the mortgage holder. If there is a fault in title that results in a loss, the mortgage holder will be paid back.

What is a homeowner's policy?
A homeowner's policy protects you, the purchaser, against a loss that may occur from a fault in your ownership or interest you have in the property. You should protect the equity in your new home with a title policy.

What does a homeowner's policy provide?
Protection from financial loss due to demands that may be charged against the title to your home, up to the cost of the title policy. Payment of legal costs if the title insurer has to defend your title against a covered claim. Payment of successful claims against the title to your home covered by the policy, up to the cost of the policy.

What "hidden risks" are protected under a title policy?

False impersonation of the true owner of the property by the seller or other persons previously in title
Forged deeds, releases and other documents
Deeds by persons of unsound mind
Deeds by minors
Invalid documents completed by an expired attorney
Invalid deeds delivered after the death of the grantor
Deeds by supposedly single persons but actually married
Fraud
Claims for unpaid estate inheritance and gift taxes against prior owners of your home
Unrecorded easements - giving one party the right to enter another party's property
Undisclosed descendents of former owners of your home or the land on which it is situated

How Much Is It?

How do I obtain title insurance and what does it cost?

Let the title company, attorney or agent handling the closing of your property know that you want to purchase an Owner's Title Insurance Policy. When choosing a title insurer, look for a company with experience, as well as the financial strength to protect you. In most states, the insurance commission or some other governmental body controls the premiums for title insurance policies. You only pay the premium once. The cost depends upon the purchase price of the property, and your policy amount must be equal to the purchase price.

How long does my coverage last?

Once purchased, title insurance remains in effect for as long as you own your property. Title insurance adds security and peace of mind to homeownership.

Inspection Checklist

It's a good idea to hire an experienced inspector to thoroughly check your potential new home. Many items will require the skilled eye of a professional to determine if there is a problem. Plus, the time you spend with the inspector can give you a wealth of important and invaluable information. This is an opportunity to learn all you can about the house; you shouldn't miss it.

Before you hire a professional to examine the house, do your own inspection. The following checklist will help you determine any potential and/or existing problems with the house.

Drainage	Yes	No
1. Is there dampness under the house?	( )	( )
2. Are there footprints or ribbed patterns in the dirt under the house indicating when it rains, water creeps in?	( )	( )
3. Is there mold (black or green) on wood under the house indicating heavy moisture?	( )	( )
4. Does the ground outside slope away from the house? (If it slopes into the house, you may have serious problems.)	( )	( )
Foundation	Yes	No
1. Do you see cracks in the foundation when you walk around the exterior of the house? (Hairline cracks almost always occur and should be disregarded.)	( )	( )
2. Are the cracks wider at the top than at the bottom? (This indicates actual breakage, a serious problem if the top of the break is a quarter inch or more.)	( )	( )
3.Is there an actual separation in the foundation? (This indicates not enough steel reinforcement was used when the foundation was poured.)	( )	( )
4. In a slab house, does the floor feel uneven when you walk over it indicating cracks hidden under carpet or tile?	( )	( )
5. Under the house, do any of the girders sag? This indicates that the foundation has slipped.	( )	( )
Roof	Yes	No
Wood Shake Roofs	Yes	No
1. Are there pieces of the roof lying on the ground around the house? (This is an obvious bad sign.)	( )	( )
2. Using binoculars, can you see missing shingles anywhere on the roof?	( )	( )
3. Are there any signs of leakage in the ceiling or on walls inside the house?	( )	( )
Composition Shingles	Yes	No
1. Is the color of the shingles good, or are they starting to fade (a sure sign of wear)?	( )	( )
2. Are the edges of the shingles curling up? (A sign of wear in hot climates.)	( )	( )
3. Are there any bare spots on the roof?	( )	( )
4. Are there any signs of leakage in the ceiling or on walls?	( )	( )
Aluminum Shingles	Yes	No
1. Are there signs of the color fading or peeling? (The shingles may keep the weather out, but will look terrible.)	( )	( )
2. Are there any dents or separations in the shingles indicating someone has walked on them?	( )	( )
3. Are there any signs of leakage in the ceiling or on walls inside the house?	( )	( )
Tiles	Yes	No
1. Are any tiles broken?	( )	( )
2. Have any fallen off?	( )	( )
3. Are there any signs of leakage in the ceilings or on walls?	( )	( )
Paint	Yes	No
Interior	Yes	No
1. Are there marks on the walls?	( )	( )
2. Is the current paint in good condition? Flaking indicates it may have to be sanded before new paint can be applied.	( )	( )
3. Are the colors light? (Covering dark colors may require two or more new coats.)	( )	( )
Exterior	Yes	No
1. Is the paint chipping or peeling?	( )	( )
2. Are the colors faded? (This indicates aging paint.)	( )	( )
3. Is the caulking around windows starting to fall out?	( )	( )
4. Is the aluminum siding firm, not becoming detached?	( )	( )
5. Are the gutters falling? Is the paint on them peeling?	( )	( )
Plumbing	Yes	No
1. Is the plumbing copper instead of galvanized steel? (Galvanized steel lasts about 30 years, sometimes less - copper lasts virtually forever.)	( )	( )
2. Are there leaks at the joints of galvanized pipes? (These are usually visible under the house or in the garage; they indicate electrolytic action may be corroding the pipes and may need to be replaced.)	( )	( )
3. Are there leaks under the sinks in any of the bathrooms or in the kitchen?	( )	( )
4. Is the water heater old? (The date is sometimes stamped on the label - a water heater rarely lasts more than seven years.)	( )	( )
5. Does the water heater have a safety valve? (This is vitally important. If you're not sure what a safety valve is, have a professional check it out.)	( )	( )
Wiring	Yes	No
1. Do switches or sockets spark when used?	( )	( )
2. Are there inoperative lights or switches?	( )	( )
Heating	Yes	No
1. Does the flame in the furnace turn yellow and rise high above the burners? (A bad sign indicating a ruptured combustion chamber.)	( )	( )
2. Do you smell gas around the furnace? (A very bad sign - call the gas company immediately.)	( )	( )
3. If there is radiant heat or heating that requires plumbing, are there any leaks?	( )	( )
Fireplace	Yes	No
1. From the outside, is the fireplace tight against the house, or can you see a separation? (A separation is a big danger sign - have a professional check it out.)	( )	( )
2. Are there any visible cracks in the external bricks?	( )	( )
3. Are there any cracks in the firebricks inside the fireplace?	( )	( )
Tile	Yes	No
Are there any cracks in the tile of the kitchen or bathrooms? (Cracks can be caused simply by dropping something heavy on the tile or can be symptomatic of the house movements and a cracked foundation.)	( )	( )
Termite Report	Yes	No
1. Is there a termite report?	( )	( )
2. Are you getting a termite clearance?	( )	( )
3. Will the seller pay for all repair work? (Normally the buyer pays for any preventive work.	( )	( )
Hazards	Yes	No
1. Are there asbestos ceilings?	( )	( )
2. Are the pipes asbestos-wrapped?	( )	( )
3. Are there leaded copper pipe joints?	( )	( )
4. Are smoke alarms working?	( )	( )
5. Is there proper insulation?	( )	( )

Consider the Contract

A valid real estate contract must be in writing and be freely offered by the buyer and accepted by the seller. All parties to the contract must be legally competent to do business. Money or other valuable consideration needs to be exchanged for title to the property.

Keep in mind that if things go wrong, the buyer could require you to sell your home to him/her or pay damages. Be familiar with the terms of any contract you give to a would-be purchaser.

Consider the contract as a whole. Is it slanted in favor of the buyer? If so, consult an attorney about making changes. Analyze the document as a series of paragraphs or clauses, each written to benefit one party or the other.

Key Elements of the Contract

Price and terms
If a low offer comes your way, remain cool until you've examined the terms. Nothing evokes a more emotional response than a low bid. Be realistic and objective because many properties don't bring full price. Don't use price alone as a reason not to counter or negotiate. A first offer may reveal what's most important - price or terms - to this particular buyer, giving you the key to begin bargaining. Today most Realtors use a standard form called: The Rejection of Offer With a Invitation to Submit New Offer. This form simplifies the process and gives the potential buyer some insight into what terms were unacceptable in the first offer.

Condition of home and inspection
The purchaser should have your home inspected for soundness of construction and state of repair. Include all mandatory and voluntary disclosure statements concerning the property's condition, such as known defects in the contract.

Be careful what you guarantee. You cannot be sure the roof won't leak, the heating system won't go out or any other number of such assurances. Once the property is sold, you are no longer responsible for it.

Response deadline
You'll be asked to respond to an offer within a specified timeframe. Try to get as long a response time as possible. Other offers may come up and you'll want to buy time to review them and perhaps use one offer to increase another.

Settlement date and occupancy
If you have another home under contract, seek a settlement date that will enable you to take your sales profits to the next closing. Be realistic; the buyer of your home will probably need at least 30 to 50 days to arrange financing and close.

Finalizing
Everything in the offering contract is negotiable. When everyone has agreed to the terms, initialed the changes and signed the contracts, you've got an agreement binding on all parties. All that remains is removing contingency clauses, arranging financing and clearing title.

Escrow Info

What is an Escrow?
An escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a specific condition or event. It is an independent neutral account by which the interests of all parties to the transaction are protected.

When opening an escrow, the buyer and seller of a piece of property establish terms and conditions for the transfer of ownership of that property. These terms and conditions are given to a third, impartial party known as the escrow holder. The escrow holder has the responsibility of seeing that the terms are carried out.

The escrow is a "storehouse" for all monies, instructions and documents necessary for the sale of your home. This includes the buyer providing funds for a down payment, and the seller depositing the deed and any other necessary papers.

Why Do I Need an Escrow?
An escrow will provide you with a guarantee that no funds or property will change hands until ALL of the terms and conditions have been followed. The escrow holder has the responsibility to watch over the funds and/or documents and then pay out the funds and/or transfer the title only when all requirements of the escrow have been completed.

How Does the Escrow Process Work?
The buyer, seller, lender and/or borrower cause escrow instructions to be created, signed and delivered to the escrow officer. The escrow officer will then process the escrow, in accordance with the escrow instructions. When all conditions required in the escrow are met, the escrow is "closed."

Prior to close of escrow, the buyer deposits the funds required with the escrow holder. The buyer instructs the escrow holder to release the money to the seller when:

The deed records
A policy of title insurance is prepared and delivered to the buyer

The escrow holder acts for both parties and protects the interests of each within the power of the escrow instructions. Escrow cannot be completed until the instructions have been fully satisfied and all parties have signed escrow documents. The escrow holder takes instructions based on the terms of the purchase agreement and the lender's requirements.

The duties of the escrow holder include:

Managing the funds and/or documents in accordance with instructions
Paying all bills as authorized
Responding to requests from the principals
Closing the escrow only when all terms and conditions have been met
Distributing the funds accordingly

How Do I Open an Escrow?
Generally, the seller's real estate agent will open the escrow. As soon as you complete the purchase agreement, the selling agent will place the buyer's initial deposit, if any, into the escrow account at a title company or into the real estate broker's account.

What Do I Need to Do Before My Appointment to Sign Escrow Papers?
All parties signing the documents must bring proper identification. Bring either a valid driver's license, state identification card or current passport with you to the title company. This item is needed to verify your identity by a notary public. This is a routine, but necessary step for your protection.

What's the Next Step After I've Signed the Closing Escrow Papers?
After both parties have signed all the necessary instructions and documents, the escrow officer will return the buyer's loan documents to the lender for final review. After the review is completed, the lender is ready to fund the buyer's loan and informs the escrow officer.

How Long is an Escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months.

What is an "Escrow Closing"?
An escrow closing is the climax of the transaction. It signifies legal transfer of title from the seller to the buyer. Generally, the Grant Deed of Trust is recorded within one working day of the escrow holder's receipt of loan funds. This completes the transaction and signifies the "close of escrow." Once all the conditions of the escrow have been satisfied, the escrow officer informs you or your agent of the date escrow will close and takes care of the technical and financial details. The final closing papers are disbursed upon close of escrow, when the escrow officer verifies with the County Records Office that the documents have recorded and legal transfer has occurred.