Frequently Asked Questions
1. WHAT DOES A TITLE COMPANY DO?
Think of a title company as the final stop on the road to a real estate or refinancing settlement. We oversee the interests of all parties — buyers, sellers, lenders, real estate agents — and coordinate the transfer of money and property at the time of closing. Prior to settlement the title company will research the ownership history of the property (title examination) to determine that the title is free of any liens or claims. At the settlement table, the title company collects and distributes funds from the transaction, transfers ownership of the property, and issues title insurance.
2. WHAT IS TITLE INSURANCE, AND WHY DO I NEED IT?
Title insurance protects you, the property owner, and the lending institution that holds your mortgage from unforeseen claims that may arise against your property. The policy provides protection from financial loss and payment of legal costs associated with such claims.
3. BUT IF THE TITLE COMPANY DOES ITS JOB RIGHT, WHY WOULD I HAVE TO BE CONCERNED ABOUT CLAIMS AGAINST MY PROPERTY?
The title examination performed by the title company is thorough, but limited to public records. Suppose a prior owner of your property recorded a forged deed. There would be no way for the title company to know that this document was a fake. At some point, the rightful owner could come forward to claim ownership of the property. Without title insurance, your investment is at risk.
4. DO TITLE COMPANIES CHARGE DIFFERENT RATES FOR TITLE INSURANCE?
Title insurance companies have similar rate schedules and associated fees. Many times you will find little rate difference, but it is important to keep other factors in mind when picking a company. The important criteria to look for are flexible schedules, timely service and most importantly competent personnel. Ask an agent how long he/she has been in business and ask others in the community about their reputation.
5. AM I REQUIRED TO PURCHASE TITLE INSURANCE?
Most lenders will require that you purchase a lender's title insurance policy. This protects their investment in your property. You are not required to purchase an owner's policy; however, your one-time payment will protect your property for as long as you own it.
6. I KEEP HEARING ABOUT SETTLEMENT COSTS. BESIDES PAYING FOR TITLE INSURANCE, WHAT OTHER FEES WILL THE TITLE COMPANY CHARGE?
You will probably be asked to pay for the title examination, as well as fees for handling the settlement and document preparation, as well as out of pocket expenses.
7. WHY TITLE INSURANCE IS NEEDED WHEN REFINANCING A MORTAGE LOAN.
Today's lower interest rates have spurred you to refinance your mortgage. Now you can expect to reap the benefits of substantially reduced monthly mortgage payments, but you can also expect to pay the lender the typical closing costs associated with any mortgage loan.
Why? Because from the lender's standpoint, a refinanced loan is no different than any other mortgage loan. So be prepared for service fees or points and other expenses including a new charge for title insurance.
Title Insurance is Important When Refinancing
Why do you need to buy title insurance again even though you purchased a policy when you first bought your home and there is no change in ownership? It's because a separate policy is needed by the lender insuring the validity of your mortgage when it is made. For as long as you own the property your mortgage is valid, but it doesn't insure the new mortgage created when you refinance, and it doesn't provide protection against events that may have transpired between the time you purchased the property and when it is refinanced.
For example, you may have taken out a second mortgage on the home that could threaten the priority of the new lender's mortgage. Or, there could be legal judgments against you or a mechanic's lien against the property by a supplier who wasn't paid for home improvements.
Lenders also insist on a new title policy because many mortgages are packaged as securities and sold to investors in the secondary mortgage market. Title insurance is the only practical way to provide the assurance investors demand and to ensure that the mortgages backing these securities are valid and enforceable.
8. DO ALL TITLE COMPANIES CHARGE THE SAME FEES FOR THEIR SERVICES?
Fees may vary from company to company. All reputable companies will supply you with a good faith estimate of their fees and the cost of title insurance prior to settlement.
9. WHO CAN I CALL IF I HAVE OTHER QUESTIONS?
Call any of Certified Title Company, LLC’s conveniently located offices. Our expert staff will be happy to assist you.
10. WHAT ARE THE PURCHASER(S) RESPONSIBILITIES AND COSTS?
The purchaser(s) are responsible for delivering to the closing a cashiers or certified check and policy for homeowners insurance. The costs associated with the buyer include the recording of closing documents, mortgage closing costs and the balance of sale between buyer and seller. The balance of sale costs is itemized in the Closing Statement prepared the Certified Title Company, LLC. The mortgage costs must be obtained from the purchaser(s) mortgage company.
11. WHAT ARE THE SELLER(S) COSTS?
The costs to the seller(s) are deducted from the proceeds of the sale. Examples of the costs are as provided in the Contract of Sale, transfer tax, commission, mortgage payoffs, etc.
12. HOW MANY DAYS IN ADVANCE DO I NEED TO SET UP MY CLOSING?
By submitting all of the necessary information for closing, Certified Title Company, LLC can close your transaction at your convenience but, at least a few days are necessary for CTC to order and receive payoff information from existing lenders.
13. WHAT ITEMS ARE NEEDED AT CLOSING?
You will want to have these items complete or in hand when you come to the closing:
o Buyer's copy of purchase agreement
o Certified or Cashier's check(s) to make all payments
o Proof of purchase of insurance for fire, casualty, etc.
o Photo identification (passport, driver's license, or state-issued identification card)
o Seller's copy of purchase agreement
o Invoices for any unpaid taxes, utilities, assessments, and latest utilities meter readings
o Receipts for last payment of interest on mortgages
o Any unrecorded instruments that affect the title
o Proof of satisfaction of any mechanics' liens, chattel mortgages, judgments, or mortgages that were paid prior to the closing
o Photo identification (passport, driver's license, or state-issued identification card)
14. CLOSING PROTECTION LETTERS: WHAT ARE THEY AND WHY DO LENDERS REQUEST THEM?
Many lenders routinely request closing protection letters. A closing protection letter, sometimes referred to as an insured closing letter, is a document issued by title insurance underwriters that sets forth an underwriter's responsibility for negligence, fraud and errors in closings performed by agents and approved attorneys. It indemnifies the Lender against loss or damage arising from a breach of certain fiduciary duties owed by the closing agent to the parties to the transaction. This document is necessary because the agency /principal relationship between an underwriter and a policy issuing agent or approved attorney is limited to the issuance of a policy and does not extend to escrow functions.
15. WHAT IS A TITLE SEARCH?
You've decided to purchase a home and hope to take possession as soon as possible. The terms have been agreed upon and all the financial arrangements have been made. But there's one important detail remaining. Before the transaction can close, a title search must be made.
The most accurate description of title is a bundle of rights in real property. A title search is the process of determining from the public record just what these rights are and who owns them.
A title search is a means of determining that the person who is selling the property really has the right to sell it, and that the buyer is getting all the rights to the property (title) that he or she is paying for.
The title company in those jurisdictions can undertake the search process where the company maintains offices. In some areas, however, only practicing attorneys make searches. However the search is performed, in most real estate transactions today a title insurance policy is purchased to assure the buyer that he or she has purchased a valid title.
In those transactions where title insurance is involved, the title company must determine insurability of the title as part of the search process. This leads to the issuance of a title policy, which insures the existence or non-existence of rights to the property.
The title insurance company will, at its own expense, defend the title and will pay losses within the coverage of the policy if they occur. But what exactly, is involved in a title search? Beltway Title and Abstract, Inc. provides the following step-by-step review:
Chain of Title
This is simply a history of the ownership of a particular piece of property, telling who bought it and sold it, and when. The information may be derived from public records usually a County Clerk's or Recorder's Office or obtained from title plants privately owned and maintained by title companies. There are great varieties of such plants index cards, punch cards, tract books, and even sophisticated computerized plants. However, they all contain essentially the same information from which the history of the title may be secured.
This is a search to determine the present status of general real estate taxes against the property. The tax search will reveal if taxes are current or whether any taxes are past due and unpaid from previous years. In addition, the tax search will indicate the existence of any special assessments against the land and, if so, whether or not these assessments are current or past due.
A due and unpaid tax or special assessment can be a prior lien or claim on the property above all others. If a buyer purchases property with unpaid and past due taxes or assessments against it, he or she is likely to find a government body, the village, county or state placing the property up for sale to pay those taxes or assessments. A tax search reveals the status of the taxes. Title insurance protects the buyer against loss from unpaid and past due taxes and assessments.
Judgment and Name Search
One of the most important parts of the title search is to determine if there are any unsatisfied judgments against the seller or previous owners, which were in existence while they owned the title. A judgment is a general lien against the debtor's real estate and constitutes security for any money owed under the judgment. The real estate can be sold to satisfy the judgment.
It is extremely important to be sure that a title is not subject to judgments against the seller or previous owners. Title insurance provides this protection. A judgment against a person named Smith may affect the title of a seller named Smith, depending on whether or not they are the same person. So all possible variations of the name must be examined.
Rights established by judgment decrees, unpaid federal income taxes, and mechanic's liens all might be prior claims on the property, ahead of the buyer's or lender's rights. If a judgment is discovered that constitutes a defect in the title, it is pointed out, and the seller must then eliminate it before the title of the new buyer can be insured free and clear of that judgment.
When these searches have been completed, the title company issues a commitment to insure, stating the conditions under which it will insure the title. The buyer and seller and the mortgage lender can proceed with the closing of the transaction after clearing up any defects in the title, which may have been uncovered by the search and examination.
The mortgage lender is as concerned as the buyer about the quality of the title because the property is to be security for the new mortgage loan. The mortgage lender requires assurance that it has a valid first (or another acceptable priority) mortgage lien on the property. This is not only common sense, but generally is a legal requirement of regulated mortgage lenders.
The lender's title insurance, however, doesn't protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the lender are very different. The provisions of a lender's title insurance policy are very different from those of a buyer's policy, so the buyer should obtain his own policy, often issued simultaneously with the lender's policy.