- What is Title Insurance?
The purchase of a home is probably the single largest investment you’ll make in your lifetime. It is only prudent that you want to safeguard your rights and investment. Title insurance assures that your rights and interests to the property are as expected, that the transfer of ownership is smoothly completed and that you receive protection from future claims against the property. It is the most effective, most accepted and least expensive way to protect your ownership rights.
Because land endures over generations, many people may develop rights and claims to a particular property. The current owner’s rights – which often involve family and heirs – may be obscure. Prior owner interests may not have been completely transferred or relinquished. There may be other parties (such as government agencies, public utilities, lenders or private contractors) who also have rights to the property or have interests in the property as collateral for a debt. These interests limit the ownership of any buyer.
Before your real estate transaction closes, the title company performs an extensive search of all recorded documents related to the property. These records are then examined by experienced title examiners to determine their effect on the current status of ownership and a Commitment to Insure is issued to you or your agents for review. This thorough examination generally allows any pending title problems to be identified and cleared prior to your purchase of the property. More than 1/3 of all title searches reveal a title problem that title professionals fix before you go to closing. This is one of the primary benefits of title insurance and a significant portion of the premium goes toward this work—after all, the goal is to prevent you from having a problem after you buy the property.
Even though title insurance agencies work to eliminate risks and prevent losses caused by defects in the title before the closings, you still need a title insurance policy?
Even after the most careful research, some title flaws may go undetected. Among the more common flaws to title which are not of record are forgery, invalid court proceedings, mistaken legal interpretations, defective deeds, confusion due to similarity of names, previously unrecognized rights of spouses and undisclosed heirs. These problems may surface at any time in the future.
Protection against these flaws and other claims is provided by the title insurance policy which is issued after your transaction is complete. Two types of policies are routinely issued at this time: an Owners Policy which covers you, the buyer, for the full amount you paid for the property; and a Lender’s Policy which covers the lending institution over the life of the loan. When purchased at the same time—a simultaneous issue, you can obtain a substantial discount in the combined cost of an owner’s and a lender’s policy. Unlike other forms of insurance, your title insurance policy requires only one moderate premium for a policy to protect you and your heirs for as long as you own the property, and even beyond, as coverage is provided if you have liabilities for title defects under warranties of title after you convey. There are no renewal premiums or expiration date, and the protection continues even after you sell the property with a warranty deed.
The policy agrees to assume the responsibility for legal defense of your title for any defect covered under the policy’s terms and to reimburse you for actual financial losses up to the policy limits.
The Owners Policy is an essential part of your real estate transaction. Please verify that you will be insured.
- What Sellers Should Provide Before Closing
To facilitate the closing process, the Seller is asked to provide the following information and documentation:
- Existing Owners Title Insurance Policy—this expedites the title search and may provide rate discounts.
- Home Owners Association/Condominium Association contact information and current pricing structure.
- Current Lender Information—account numbers, contact information and written authorization allowing Mason Title to obtain Payoff Information from all existing mortgage holders. Mason can provide the Authorization Forms, or they are available here on this website.
- Termite Service Provider—contact information
- The last 4 digits of your social security number may be needed to distinguish between matters such as bankruptcy or judgments against parties with similar names.
- What Sellers Should Bring To Closing
- Identification – at least one form of identification, a driver’s license or other government picture id
- Original Powers-of-Attorney to be used at closing*
- Collected funds for any money due in the form of a bank check, cashiers check, certified check, money order or wire
- Any Invoices to be paid at closing**
- Original termite letter with paid receipt (without a paid receipt, the fee will be collected at closing)
- Social Security Number
- Forwarding address and new phone number
- House keys, garage door openers, etc.
- Spouse, if the owner is married, in title without the spouse and the property is homestead.
- Documents Typically Signed By Seller At Closing
Closing, or settlement, is the completion of the real estate transaction. The parties gather at the title company office, together or separately, or before a notary if conducted remotely, to execute all required documents. The buyer and seller, if applicable, remit any remaining funds due, as does the realtor if holding the Earnest Money Deposit, and of course the lender transmits the loan funds if there is to be a mortgage. The settlement agent disburses funds as set out on the HUD-1 Settlement Statement.
This is a list of the documents that a seller will sign at a typical closing:
- HUD-1 Settlement Statement: sets out all receipts and disbursements made by, on behalf of, or to the buyer and seller in the transaction. Items paid outside closing for the closing are so marked as POC.
- Deed conveying title to buyer; deed may take one of several forms:
- Warranty Deed – warrants title against the claims of all persons;
- Limited or Special Warranty Deed – warrants title against the claims of all person claiming loss as a result of seller’s ownership;
- Quit-Claim Deed – contains no warranties as to title.
- Trustee’s Deed – Deed from Trustee if property is held in trust for another and is also typically also a Warranty or Special Warranty Deed.
- Personal Representative’s Deed – Deed from Personal Representative in some circumstances if the record owner is deceased. It is also typically a Warranty or Special Warranty Deed.
- Affidavits: Where applicable, seller executes sworn statements relating to:
- Owner’s affidavit, certifying about recent construction or improvements on the property, no recent bankruptcy, continuous marriage if applicable, etc.
- same name affidavit–name variations or “aliases”
- knowledge of matters relating to the title
- other matters specific to the particular transaction
- IRS form 1099: reports the sale to the IRS.
- For Sale By Owner
A real estate transaction is a complicated legal process, one involving the co-ordination of a number of professionals to achieve the goal of buyer and seller, sale of the property in compliance with state and federal laws and regulations. It is advisable to use the services of a qualified professional real estate agent to accomplish this goal.
Should you choose to sell your property without the assistance of a real estate agent, the experienced real estate professionals at Mason Title & Escrow Company can help with the process. We have the experience to guide you through the process in a smooth and professional manner. We will:
Prepare and issue a Commitment for Title Insurance on the property. This Commit to Insure will disclose liens and encumbrances that might exist and the requirements necessary to properly convey title to the purchaser as required by the contract.
Prepare all the documents necessary for closing, including the deed and settlement statement.
Co-ordinate the settlement and arrange for closing, whether all parties attend locally or anywhere in the world.
Receive, hold and disburse all money according to the instructions of the parties, expressed in the real estate contract or otherwise, including Earnest Money Deposits, and the funds at settlement, which includes mortgage payoffs, sale proceeds, etc.
Record all documents necessary to transfer title, paying recording charges and transfer taxes.
If you choose to go it alone, let us provide some of the assistance you need.
- The Earnest Money Deposit
Most offers to buy a house are accompanied by a check. This check is generally referred to as the “earnest money deposit.” The basic reason for the deposit is to impress the seller that the buyer “earnestly” intends to purchase the property; a good faith deposit to show the buyer is serious about the purchase.
The amount of the deposit varies from purchase to purchase, depending on a variety of factors. If a property generates a lot of interest, a buyer may make a larger deposit to convince the seller that their offer is stronger than the others. During “hot” markets, deposits are generally larger than during slow markets. The amount of the deposit should be made upon consultation with your real estate agent.
There are reasons to try and keep the deposit as small as possible, but not so small that the seller doesn’t take it seriously. You see, once a buyer and seller agree to terms, the earnest money deposit is usually placed in a “trust” account. At that point it is no longer the buyer’s money — it belongs jointly to the buyer and seller. This trust account may be with the real estate broker or with a title insurance agency or attorney. The deposit should generally not be given directly to the seller.
Almost all deals close and the earnest money funds are applied to the buyer’s down payment and closing costs. As the saying goes, however — there are exceptions to the rule.
Some sellers think that if the deal falls through, the earnest money deposit is automatically forfeit. Some buyers think that if the deal doesn’t close, they automatically get the money back.
Neither one is true. It is controlled by the contract. Read the contract carefully to determine what happens to the deposit if the deal fails to close.
Since the deposit is held in trust, both the buyer and seller must agree on the disposition of the funds. Neither the real estate agents, their companies nor the title company or title attorney have any control over this.
Most disagreements are settled amicably and the deposit returned to the buyer, or forfeited to the seller, or divided per a negotiated split. If no agreement is reached, after notice to both parties, Mason Title will deposit the money with the Circuit Court in the County where the property lies. After the court resolves the disputes, Mason’s costs to retain an attorney to initiate the case and represent it during the case will be deducted from the deposit, along with the court costs. The remainder, if any, will be disbursed by the court in accordance with the judge’s order.
- Using ResWare To Your Advantage
Mason Title & Escrow Company uses one of the most advanced, sophisticated, title & escrow file management systems available–ResWare.
ResWare manages the entire transaction through a single interface, and puts the power in the users hands, and in the hands of the customers. We count on ResWare for:
- Workflow and Automation Management
- Vendor Management
- Document and Template Management
- Communications Management
- Title Production
Why does this matter to Realtors, Seller, Buyers, Lenders and Brokers?
- Parties to the transaction, when assigned access codes, can log into a customized Web site to view their files, download documents, enter orders online, and correspond with employees. Access continues after the closing, so documents needed later–title policies, settlement statements, surveys–can be retrieved at any time
- Customizable workflow ensures staff consistency, reduces missing information or documentation, improves communication internally and externally, making for smoother and error free closings
- Communication Management shares information about files across the employee base, making it possible for multiple persons to assist with files if assigned staff are not readily available
- ResWare turns all documents and communications into electronic files, reducing paper and document misplacement, and making those documents readily accessible to all authorized parties.
- Employees communicate quickly and effectively through e-mail, faxes and the ResWare interface directly from a customer file, and all such communications are logged and preserved.
- Incoming e-mail messages and attachments are automatically locked to a customer file when a valid file number is found in the e-mail’s subject line, making ResWare the central repository for all communications.