Whether it’s your first time buying or selling a home, one of the most confusing aspects of either process is learning the lingo. Fixtures, encumbrances, contingencies – real estate jargon starts flying fast and furiously. The various players in the process, their roles, and responsibilities seem to confuse consumers the most and the title company sits at the top of that list. According to a Birmingham Title company, South Oaks, a title is “evidence that the owner is in lawful possession of that property.” So, how does one determine who has “lawful possession” of a particular piece of property and, thus, the right to sell it? The title company – but that’s not all it does. Let’s take a look what does a title company does by learning about the three main functions.
Researching The Home’s Title
This is the first thing a title company does is research the history of the home. Shortly after the ink dries on a contract to purchase a home, it’s delivered to the chosen title company where it will be assigned to a closing agent. Since the contract is also considered escrow or closing instructions, this agent is tasked with following it to the letter. Then, the research begins and the first step is a thorough examination of any public records pertaining to the property. These include, but aren’t limited to:
- Mortgage records
- Probate court records
- Divorce records
- Sewer assessments
- Tax records
For instance, Jeff was trying to sell his deceased mother’s home which was sitting on foreclosure’s doorstep. He received a reprieve from the bank – he had 90 days to sell the home or they would begin foreclosure proceedings. During the escrow period, the bank’s lien, placed while Jeff’s mother was still living, came up and the transaction came to a halt until the bank submitted a release of the lien. Some of the issues that a title search turns up are trivial but larger issues need to be cleared before the transaction can proceed.
Issues A Preliminary Title Report
Title research may not turn up all issues with the property’s title, so title insurance policies protect against any future claims against the property for events that happened in the past.
For example, Bratley holds title to his grandmother Mable’s home as tenants in common. In 2005, Mable was admitted to a long-term care facility. The following year, Bratley sold gramma’s house, forging Mable’s signature on a full-authority power of attorney. He even had it notarized.
When the home sold, Bratley not only signed the closing documents on behalf of himself and Mable, but authorized that the proceeds from the sale be wired to his personal account. Three years later, Mable passed away, leaving the executor of her will to settle her estate. In so doing, the homeowners who bought Mable’s home were served with a lawsuit, laying claim to Mabel’s heirs’ interest in the property.
Thankfully, they had purchased an owner’s title insurance policy, even though it’s not mandatory to do so. If you’ll be getting a loan to buy a home, lender’s title insurance, on the other hand, is mandatory. Since the home is the loan’s security, lenders use all avenues available to protect their interest in the property.
Both policies require only one payment, at closing, and the policies are in force for the life of the loan (for the lender’s policy) and for as long as you own the home, in the case of the owner’s policy. The National Association of Realtors pegs the average cost of a title insurance policy at $1,000 but cautions that the price will vary, depending on region and the price of the home.
At escrow/closing, you will receive a copy of your Preliminary Title Commitment. Any exceptions to coverage are detailed in the report and the coverage that is included in your policy are listed in your title commitment. The actual policy will be mailed to you after closing. The time frame in which you receive the formal title policy will have to do with the staffing resources available at the Title Insurance Company. If you have not received it within 4-6 weeks follow up with your agent or closing attorney. They can get in touch with the title company and find out when it should arrive.
If you are concerned with any issues that have arisen with your property lines or other matters that would be covered, I suggest you find your Title Commitment from the documentation of your transaction and then call your Title Insurance company and ask to speak to a Title Officer. They can answer your questions directly.
Once you receive your title policy, along with your closing documents, place it in a fireproof safe or wherever your important documents are kept. If a concern ever arises with your property lines or other matters that would be covered, find your Title Commitment from the documentation of your transaction and then call your Title Insurance company and ask to speak to a Title Officer. They can answer your questions directly.
When it comes time to sell your house you will want to give a copy of the policy to your closing representative at the time of contract. With a prior owner’s policy, the reissue credit is up to a 40%. This credit shall apply up to the amount of the prior Owner‘s policy. If the amount of insurance for the new Owner’s policy is in excess of the amount of the prior policy, the excess must be computed at the original charge from the appropriate bracket. The underwriter is under no obligation to seek or make a determination of the existence of a previous policy, so be sure to make a copy to be submitted to the title agent at the time of a finalized contract on the house.
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