When you are in the process of buying or selling a real estate property you might have multiple contact points at every step of the process.
From your real estate agent to the closing agent, all point of contact has their significance in the home buying process.
In this post, we will understand the roles and responsibilities of one of the most important teams that help you behind the curtains in your buying process, ‘Title Company’.
A title company is a neutral party that has many responsibilities during a real estate sales transaction.
The title company enters the process once the buyer and the seller sign the sales contract.
It holds the earnest money deposit in escrow that the buyer makes after signing the sales contract.
It also conducts the title search to ensure the property title is clear and there are no claims, liens, or any other issues with the ownership of the property and help the buyer and the seller at the time of closing.
A title company has 3 key responsibilities.
A title company would be responsible to do a title search on the property in question.
This will help the buyer and the seller know if there are any existing and hidden liens or claims against the property or anything that challenges your right to own the property.
In this process, the assigned company will go through public records to verify the seller’s ownership and determine if any issues could impact the buyer’s ownership in the future.
The title agent or the escrow officer will conduct a thorough search through county records and other sources to ensure that the seller has the right to sell the property.
The report provided by the title officer will include the chain of ownership, pending claims, liens against property, judgments, surveys, encumbrances, easements, etc. so that all the issues are cleared before the property is transferred to the buyer.
They will also provide a title insurance policy to protect the buyer’s ownership rights.
Just like you need insurance for your car or home for the future, title insurance will protect you from the past.
If there are any claims or liens that were missed during the title search, your title insurance will cover the same.
This is a one-time premium that the buyer pays at the time of closing along with other closing costs. This will protect your ownership of the property for the length of time you own the property.
Once the sales contract is signed, the title company will hold the earnest money deposit paid by the buyer in an escrow account till the closing.
Before closing the title company will gather all the documents in form of a package from the lender also known as closing disclosures.
Once the package is received from the lender, they will make sure all the numbers on the packages are matched with their numbers.
At the closing, they will produce the final package for you and the seller to sign in presence of a notary and ensure that the money is collected from the buyer to pay off the vendors.
Finally, they will ensure that the signed copy of this package is sent to the lender and buyer.
Title companies play a very crucial role in the home buying process. They make sure that the title of the home is clear for transfer, maintain an escrow account till closing, and help in closing the transaction.
You as a buyer have an option to choose your title company for your real estate transaction.
You have to make sure that you have a good and reputable title company for your real estate transaction for a smooth process.
In the journey of home buying, many times people are only saving up for their down payment and are not aware of many things that they will have to purchase.
An owner’s title insurance is one of the most important purchases that a purchaser must make.
While buying a house, a buyer needs to take care that they are not facing risks. The old homeowner’s paperwork may not have been correct, or there could have been some fraudulent activity related to the property.
With an owner’s title insurance, the homeowners are protected against any problems related to their deed or property ownership that might come up after they buy a house.
In all these cases, it is possible for a third party to try and lay claim on the property. With title insurance the risk to a buyer who wasn’t aware of an existing problem reduces.
Even if a title search is completed before the purchase of the property, an issue may pop up any time and it may not show until after ownership of the property.
The lender may make the borrower purchase a lender’s title insurance policy when getting a mortgage.
If the ownership of the property is contested this title insurance will protect the amount they lent out.
A lender’s title insurance policy pays the lender the outstanding amount they’re owed when someone else claims ownership of the property, and if it’s legally upheld.
But a lender’s title insurance doesn’t protect the owner or their investment. If a claim to ownership comes up, the new owner will have to pay for legal proceedings.
The owner could also lose the money they have spent on their down payment and subsequent mortgage payments. Hence a separate owner’s title insurance policy is a wise purchase.
As long as the owner has the home the more valuable the Owner’s title insurance becomes.
As the owner continues to pay their mortgage, they own a greater percentage of their property and have more to lose.
A title claim can come up at any time, even after decades of being in the house. One should have an owner’s title insurance policy if they plan to stay in their home for many years.
Many times owner’s title insurance is often confused with the lender’s title insurance.
A lender’s title insurance is usually required for the purpose of getting a mortgage loan.
So if a question is asked as to, is owner’s title insurance is required, then the answer is no, there’s no law requiring the owner to purchase any additional policy to cover their potential losses.
In many cases, the new buyer could be in charge of covering the cost of the owner’s title insurance policy.
While in some states of America, it is the seller who is responsible for purchasing a title insurance policy for the new owner.
In a few other states, the purchase price of the policy is negotiated and divided among the buyer and seller. A real estate agent is the right person who can tell you how it works in your state.
An owner’s title insurance policy is a one-time cost for protection against any financial loss related to a problem with the title.
If the new owner is sued by anyone claiming that their deed is fraudulent and the property belongs to them, the policy covers all the legal fees and court costs. If the state claims for past unpaid property taxes, the policy covers those too.
Though these are issues that one would have no way of knowing about and are not responsible for causing, yet it could cost a lot of money to fix them.
A title insurance policy can cover legal expenses and liens, along with the loss of homeowners’ down payment or monthly mortgage payments.
Even if they have only put little or no money down, they may need a lawyer to help them get a forgery on the deed taken care of.
There is no way of knowing that information on the deed was fraudulent, so to get it sorted out they have to pay legal fees for help.
The owner might consider a title insurance policy if they don’t anticipate having the funds to easily pay legal expenses.
Many times when someone is buying a home from their parents, who got it from their parents, they may think there are no hidden surprises. But many a time old easements and other issues can come up from decades ago.
Title insurance is a type of insurance protecting homeowners against claims on the title to the property.
If after the purchase there are disputes over title ownership, the insurance policy pays for all the legal fees to resolve them.
Title insurance is very different from other types of insurance that help cover future mishaps, it protects the policyholder from any past title discrepancies from the previous owner that might be uncovered during or after the purchase of the property.
Seek help from a lending advisor to answer all the questions about buying a home and guide you to decide about title insurance, and the costs you’ll pay to your lender.
If you are looking to buy a new home, on your loan estimate, you would see something called Title Insurance.
Title insurance is essential and can protect you from potential policy defects when you are buying a home. In this post, we will learn more about title insurance in Texas.
Title insurance is best defined as a policy that protects property owners and lenders from losses that could result from disputes over ownership of the property’s title.
Basically, you want to make sure that the seller truly has the right to sell a piece of property and that when the transaction closes that you as a home buyer would actually own it.
Title insurance is extremely important because it will protect you from title hazards that could threaten the financial investment that you made by purchasing your home and any other property.
It also protects the lender’s investment as well.
An owner’s policy is a form of insurance that guarantees that a buyer has the right to the property, meaning they legally own it. It usually covers the cost of any legal fees that arise if you have to defend your claim.
So having an owner’s policy is very crucial because it will protect in the future. The policy ensures your claim to the property and mentions that the said title company has provided you with an owner’s policy.
It will help cover you if anybody tries to challenge your claim to that property.
The best way to look at this is from the vantage point as though you were the lender.
A lender’s title policy is going to protect the benk from another lending institution that issues up the Buyer’s mortgage from any losses resulting from disputes over ‘who owns the property’.
The policy will cover the amount of the loan, and the cost is based on the amount of that loan. Most lenders will require this coverage which ends when the mortgage is paid off.
You do not have to pay a monthly premium for your title insurance in Texas. What will happen at the closing is that the policy itself will be paid for at the time of closing.
The coverage would be in the name that is on the title for that property. That coverage will last as long as you own that property until you transfer it on to someone else’s name you are covered.
There are eight core things that title insurance covers.
1: Fraud: Fraud associated with the title ownership.
2: Liens: Any liens existing against the property at the time the policy was issued.
3: Mistakes in Public Records: The errors in public records that are not caught at the time of sale.
4: Inaccurate / Conflicting Wills and Trusts: Any inaccurate wills or trusts that were made related to the title.
5: Heir Disputing Ownership: Any missing heirs who suddenly appear and claim to own the property.
6: Forged Deeds and Documents: Misfiled or forged deeds or other documents.
7: Undiscovered Errors/Flaws: Any errors or flaws in titles that are not discovered in the initial title examination.
8: Loan Amount and Interest Cover: The lender’s title insurance covers the amount of the mortgage loan and protects the lender’s interest in the property if any of the first seven situations were to occur.
In Texas, the choice of a title company is freely negotiated between the Buyer and the seller. In the past, the seller has traditionally paid for the title policy, due primarily to the seller’s contractual obligation to pass good title to the purchaser.
However, with the market moving to a ‘Seller’s Market’ we are seeing more Buyers offering to pay for this policy since this enhances the strength of the offer in competing for offer situations.
The title search is a process to make sure that the seller is the legal owner of the property, and there aren’t any outstanding claims against the property.
The title insurance cost depends on how much money that property is being sold for. Everything would be calculated from the ultimate sales price of the home in relation to how much that title insurance policy would cost.
It is critical for you to know these things about title insurance before you enter into real estate transactions. Get in touch with your trusted real estate advisor to get details about your title insurance.
Your trusted mortgage loan officer would also be in a position to give you more information on your title insurance in Texas.