Title Insurance – Sandy Gadow

How to Find Open Permits
on the Property You Want to Buy

As a potential Buyer, you may have have no reason to suspect that an outstanding permit exists on a home you intend to purchase. After all, repair or remodel work may not be obvious during a visual inspection of the property and standard purchase contracts often do not include a contingency clause for verification of open permits.

Buyers rarely request that the seller disclose work that was performed years ago. The outstanding-permit issue may lay dormant until the new owner tries to modify an electric meter, remodel a room or repair a heating system, only to find that previous work has not been officially inspected and approved.

Since open permits or building code violations will not be listed in the preliminary title report nor be covered by the title insurance policy, it is important to clear up unpermitted work early on and avoid a possible delay in the closing.

Daniel and Janet were in the final stages of selling their house, when they awoke in the middle of the night to the sound of a loud alarm. Daniel called 911, the fire brigade arrived to discover that the home’s previous owner had put in an alarm system that was hidden from view and incorrectly installed. A permit for the work had never been closed out. Daniel and Janet were obligated to either have the system removed or correct the faulty installation before their sale of their home could go through.

Work done without a permit can also cause problems for a new owner. The residential alteration may have been completed according to the local building code, but if no permit was filed, the new owner may be liable for a fine. And if the work is found to not be up to code, the new owner will be required to fix the problem, bring the alteration up to standard and get a final inspection.

There are several reasons why previous homeowners did not obtain a permit. The owners may have used a local handyman to install a washing machine inside a small closet — a job that required new plumbing and electrical work but that would not be visible when the closet door was closed. The owners may have felt that a permit was not needed because — in their opinion — the job was relatively insignificant and took only a few days to complete.

In another scenario, the owners may have added a fence to their back yard and not have been aware that an ordinance required a permit for fences over a certain height.

Sometimes owners may avoid securing a permit either to get around paying the fees or because they are afraid that their property taxes might rise if the authorities become aware of their remodeling work. Or owners who did the work themselves may have been confident the job was done correctly and didn’t see the need to apply for a permit or submit to an inspection.

Before taking a listing, many real estate agents will ask Sellers if they are aware of any open permits that exist on the property. And then they will inquire if any upgrades or changes have been made that would have required a building permit.

Agents may also ask the local title company to run a courtesy permit history search, which should reveal all permits — whether pending or closed — on a property. In some parts of the country — such as Florida, where weather-related natural disasters have caused large-scale emergency repair work to be done on short notice — a permit search is common practice whenever a property sells.

Buyers can take the initiative and look up the permit history of a property by contacting the local regulatory building department for their area. A municipal search can also reveal unpermitted work.

When you hire a licensed contractor, he or she will be responsible for obtaining a permit for the work to be performed and closing out the permit after the job is completed. If you are doing remodeling work, large or small, remember to ask your contractor to give you a copy of the

closed permit for your files.

These Common Title Problems Can Snag Your Home Closing

In almost all real estate transactions, there are title issues that must be cleared up in order to transfer ownership of the home from the seller to the buyer.

Does the seller have the legal right to sell the property? Is the home’s title free of “clouds” or “defects” — such as judgments, liens or bankruptcies — that would prevent the seller from transferring “clear” or “marketable” title to the buyer? How can you be sure?

Title companies report that in more than one-third of all real estate transactions they must undertake “extraordinary work” to address title issues. The title company will examine public records — often going back 50 years or more — to look for past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments and tax records that may be defective or outstanding.

No matter how small a problem it may be, any title issue will need to be resolved in order to offer a clear title to the buyer. The results of the search will be compiled into a preliminary title report that will be given to the buyer, seller, real estate agent, lender and attorney involved in the sale.

Mechanic’s liens are common. They are liens placed against a property that a general contractor — or anyone who provides services to improve the property — files before starting the work. It’s a way to ensure that they will get paid; the lien is supposed to be released when the job is done.

Specific laws, which vary from state to state, dictate how a mechanic’s lien must be filed, processed and/or acted upon. The procedure for the District can be different from that in Virginia, Maryland or any other state in the country. Whether it will take precedence over other liens on the property will also be specific to the jurisdiction where the work was performed.

Problems arise when the contractor fails to file a “satisfaction” of the lien and it remains on the property’s title, or when the lien is contested. The title company must determine whether the lien was filed properly and recorded in the public records, and whether notice was given in accordance with state law. Most mechanics’s liens do not have an indefinite lifespan and will expire if not acted upon in the prescribed amount of time. Mechanic’s liens usually are able to be resolved, but the process can be time-consuming — for example, if the contractor has left the area or cannot be found — and could cause the closing to be delayed.

The procedural guidelines for filing and processing a mechanic’s lien for the District, as well as Maryland, Virginia and other states, can be found at www.fullertonlaw.com.

Bankruptcies are another source for potential title issues. For example, a seller could have bought a house while single, and then married someone with a recent bankruptcy. The title company would need to be sure not only that the new spouse had signed off on the deed, but that the bankruptcy case had been discharged. If not, it would be necessary to petition the court to release the property from the bankruptcy process.

Another common type of lien occurs when a divorced spouse either forgets or doesn’t remove a lien for child support — even though the debt may have been resolved decades ago. A child could inherit his father’s house and decide to sell the property. A lien placed by his mother years ago — but since resolved — could show up in the title search and prevent the sale. The child would have to get his surviving parent to sign a “release of judgment” that states that the debt has been paid in full in order to have clear title.

Liens for past-due spousal support or delinquent taxes are also common. The American Land Title Association recently found that fraud and forgery issues between spouses have become more prevalent over the past several years and must be dealt with before a property can change hands. A typical spousal fraud issue could be that a spouse signs the signature of the other spouse on a document or deed — without telling them — to either eliminate an interest or add someone else to the title. It’s similar to when a spouse signs a joint tax return for both spouses — and one spouse is not aware of what he or she is now responsible for.

If the seller is not aware that a lien or other encumbrance is attached to the property, it can take days — or weeks — to resolve the problem. The seller may have inherited the property from a trust and be unaware that one of the beneficiaries or co-owners now lives overseas and cannot be found. The co-owner’s signature would be necessary to transfer the title, and if the owner can’t be located the legal steps to remedy the problem could take months.

Title companies do most of their remediation work behind the scenes. You may not even be aware that some title defects existed and were taken care of before the closing. Other times you may be asked to sign a document to remove or release the lien or title defect. Many title issues can be resolved by filing one of three common documents:

A quit claim deed removes an heir and clears up title among co-owners or spouses.
A release of lien/judgment removes a paid mortgage or spousal or child support lien.
A deed of reconveyance records payment of a mortgage under a deed of trust.

What about defects in the title that are not recorded — or defects that the title company has no way to know exist?

There could have been forgeries, claims from the use of an “alias” or fictitious name, a deed given under duress or fraud, deeds affecting property of a deceased person, a deed following administration of an estate of a missing person who later appears, an undisclosed but recorded federal or state tax lien, errors in the legal description, a right of access wiped out by foreclosure on a neighboring land, and many others.

For a list of more than 70 possible title issues, go to www.firstam.com/title/resources.

If you suspect that there may be title issues (unknown or unresolved liens) on your property, you can do a search of the title yourself. Recorded documents are filed at the county recorder or clerk’s office and are available to the public.

You may find an unreleased mortgage that the lender did not report as paid in full or a lien from someone you have never heard of.

A title insurance policy will be your best protection against those and many other title problems that may become known after you close on your transaction. The cost for the policy is a one-time fee, and the policy will remain in effect for as long as you own the property.

But in order to purchase title insurance, you’ll need a complete title search conducted by a title company.

State by State Closing Guide

This summary is merely a general reference guide. Local practices within your city or county may differ. Contact a local title company or real estate attorney for specific information.

This is not intended as a legal advice, but merely as a general reference guide.” For further explanation and an in-depth resource guide for your state refer to The Complete Guide to Your Real Estate Closing, available at www.amazon.com or sandygadow.com/order.html.

Please choose a state:
[ Alabama ] [ Alaska ] [ Arizona ] [ Arkansas ] [ California ] [ Colorado ] [ Connecticut ] [ Deleware ] [ District of Columbia ] [ Florida ] [ Georgia ] [ Hawaii ] [ Illinois ] [ Idaho ] [ Indiana ] [ Iowa ] [ Kansas ] [ Kentucky ] [ Louisiana ] [ Maine ] [ Maryland ] [ Massachusetts ] [ Michigan ] [ Minnesota ] [ Mississippi ] [ Missouri ] [ Montana ] [ Nebrasca ] [ Nevada ] [ New Hampshire ] [ New Jersey ] [ New Mexico ] [ New York ] [ North Carolina ] [ North Dakota ] [ Ohio ] [ Oklahoma ] [ Oregon ] [ Pennsylvania ] [ Rhode Island ] [ South Carolina ] [ South Dakota ] [ Tennessee ] [ Texas ] [ Utah ] [ Vermont ] [ Virginia ] [ Washington ] [ West Virginia ] [ Wisconsin ] [ Wyoming ]

ALABAMA

Attorneys and title companies handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are non-judicial. Foreclosure notices are published once a week for three weeks on a county-by-county basis. The foreclosure process takes a minimum of 21 days from the date of first publication. After the sale, there is a one-year redemption period. Alabamans use ALTA policies to insure titles. Buyers and sellers negotiate who is going to pay the closing costs and usually split them equally. Property taxes are due and payable annually on October 1st.

ALASKA

Title companies, lenders, and private escrow companies all handle real estate escrows. Conveyance is by warranty deed. Deeds of trust with private power of sale are the customary security instruments. Foreclosures take 90-120 days. Alaskans use ALTA owner’s and lender’s policies with standard endorsements. There are no documentary or transfer taxes. Buyer and seller usually split the closing costs. Property tax payment dates vary throughout the state.

ARIZONA

Title companies and title agents both handle closings. Conveyance is by warranty deed. Whereas deeds of trust are the security instruments most often used, mortgages and “agreements for sale” are used approximately 20% of the time. Foreclosure depends upon the security instrument. For deeds of trust, the foreclosure process takes about 91 days. Arizonans use ALTA owner’s and lender’s policies, standard or extended, with standard endorsements. The seller customarily pays for the owner’s policy, and the buyer pays for the lender’s policy. They split escrow costs otherwise. There are no documentary, transfer, or mortgage taxes. The first property tax installment is due October 1st and delinquent November 1st; the second half is due March 1st and delinquent May 1st. Arizona is a community-property state.

ARKANSAS

Title agents handle escrows, and attorneys conduct closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosure requires judicial proceedings, but there are no minimum time limits for completion. Arkansans use ALTA policies and endorsements and receive a 40% discount for reissuance of prior policies. Buyers and sellers pay their own escrow costs. The buyer pays for the lender’s policy; the seller pays for the owner’s. The buyer and seller split the state documentary tax. Property taxes come due three times a year as follows: the third Monday in April, the third Monday in July, and the tenth day of October.

CALIFORNIA
Not only do escrow procedures differ between Northern and Southern California, they also vary somewhat from county to county. Title companies handle closings through escrow in Northern California, whereas escrow companies and lenders handle them in Southern California. Conveyance is by grant deed. Deeds of trust with private power of sale are the security instruments used throughout the state. Foreclosure requires a three-month waiting period after the recording of the notice of default. After the waiting period, the notice of sale is published each week for three consecutive weeks. The borrower may reinstate the loan at any time prior to five business days before the foreclosure sale. All in all, the procedure takes about four months. Californians have both ALTA and CLTA policies available. In Southern California, sellers pay the title insurance premium and the transfer tax. Buyer and seller split the escrow costs. In the Northern California counties of Amador, Merced, Plumas, San Joaquin, and Siskiyou, buyers and sellers share title insurance and escrow costs equally. In Butte County, sellers pay 75%; buyers pay 25%. In Alameda, Calaveras, Colusa, Contra Costa, Lake, Marin, Mendocino, San Francisco, San Mateo, Solano, and Sonoma counties, buyers pay for the title insurance policy, whereas sellers pay in the other Northern California counties. Each California county has its own transfer tax; some cities have additional charges. Property taxes may be paid annually on or before December 10th, or semiannually by December 10th and April 10th. Annual taxes are set at no more than 1 percent of the property’s base value or purchase price. Each year following this, a two percent increase is permissible. (Proposition 13). A property transfer between husband and wife will not result in a new tax assessment of one percent of the fair market value.

The homeowner’s exemption allows an owner to be exempt of the first $7,000 of the property’s full cash value. This exemption is allowed only for primary residences. Homeowner must obtain a form from the county tax assessor, and submit it by February 15 of the current tax year to be eligible for the exemption. Californians over the age of 55 also have the option of moving primary residences and taking their prior “old” tax base with them to the new property. This exception may be used only once in a lifetime. Referred to as the” Senior Citizen’s Replacement Dwelling Benefit”, Proposition 60 was a constitutional amendment approved by the voters in 1986. It is codified in Section 69.5 of the Revenue & Taxation Code, and allows the transfer of an existing Proposition 13 base year value from a former residence to a replacement residence, if certain conditions are met. California is a community-property state.
COLORADO

Title companies, brokers, and attorneys all may handle closings. Conveyance is by warranty deed. Deeds of trust are the customary security instruments. Public trustees must sell foreclosure properties within 45-60 days after the filing of a notice of election and demand for sale, but they will grant extensions up to six months following the date of the originally scheduled sale. Subdivided properties may be redeemed within 75 days after sale; agricultural properties may be redeemed within 6 months after sale. The first junior lien holder has 10 additional days to redeem, and the second and other junior lienholders have an additional 5 days each. The public trustee is normally the trustee shown on the deed of trust, a practice unique to Colorado. Foreclosures may be handled judicially. Coloradans have these title insurance policy options: ALTA owner’s, lender’s, leasehold, and construction loan; endorsements are used, too. Although they are negotiable, closing costs are generally split between buyer and seller, and seller normally pays for title insurance. Sellers pay the title insurance premium and the documentary transfer tax. Property taxes may be paid annually at the end of April or semiannually at the ends of February and July.

CONNECTICUT

Attorneys normally conduct closings. Most often conveyance is by warranty deed, but quitclaim deeds do appear. Mortgages are the security instruments. Judicial foreclosures are the rule, either by a suit in equity for strict foreclosure or by a court decree of sale. Court decreed sales preclude redemption, but strict foreclosures allow redemption for 3-6 months, depending upon the discretion of the court. There are lender’s and owner’s title insurance policies available with various endorsements. Buyers customarily pay for examination and title insurance, while sellers pay the documentary and conveyance taxes. Property tax payment dates vary by town.

DELAWARE

Attorneys handle closings. Although quitclaim and general warranty deeds are sometimes used, most conveyances are by special warranty deeds. Mortgages are the security instruments. Foreclosures are judicial and require 90-120 days to complete. ALTA policies and endorsements are prevalent. Buyers pay closing costs and the owner’s title insurance premiums. Buyers and sellers share the state transfer tax. Property taxes are on an annual basis and vary by county.

DISTRICT OF COLUMBIA

Attorneys, title insurance companies, or their agents may conduct closings. Conveyances are by bargain-and-sale deeds. Though mortgages are available, the deed of trust, containing private power of sale, is the security instrument of choice. Foreclosures require at least six weeks and start with a 30-day notice of sale sent by certified mail. ALTA policies and endorsements insure title. Buyers generally pay closing costs, title insurance premiums, and recording taxes. Sellers pay the transfer tax. Property taxes fall due annually or if they’re less than $100,000, semiannually, on September 15th and March 31st.

FLORIDA

Title companies and attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are judicial and take about 3 months. They involve service by the sheriff, a judgment of foreclosure and sale, advertising, public sale, and finally issuance of a certificate of sale and certificate of title. ALTA policies are commonplace. Buyers pay the escrow and closing costs, while county custom determines who pays for the title insurance. Sellers pay the documentary tax. Property taxes are payable annually, but the due and delinquent dates are months apart, November 1st and April 1st. Under Florida law, a widow or widower has the right to live in their deceased spouse’s house for the remainder of his or her life, even if the home is willed to someone else. A Homestead Exemption exists for an owner’s residence in Florida. Florida’s exemption is unique because it lacks any monetary cap on the homestead protection, while other states which offer a homestead exemption usually place a limit on the valuation which can be protected.

GEORGIA

Attorneys generally take care of closings. Conveyance is by warranty deed. Security deeds are the security instruments. Foreclosures are non-judicial and take little more than a month because there’s a power of attorney right in the security deed. Foreclosure advertising must appear for 4 consecutive weeks prior to the first Tuesday of the month; that’s when foreclosure sales take place. Georgians use ALTA title insurance policies, including owner’s and lender’s, and they use binders and endorsements. Buyers pay title insurance premiums and also closing costs usually. Sellers pay transfer taxes. Property tax payment dates vary across the state.

HAWAII

By law, only attorneys may prepare property transfer documents, but there are title and escrow companies available to handle escrows and escrow instructions. Conveyance of fee-simple property is by warranty deed; conveyance of leasehold property, which is common throughout the state, is by assignment of lease. Condominiums are everywhere in Hawaii and may be fee simple or leasehold. Sales of some properties, whether fee simple or leasehold, are by agreement of sale. Mortgages are the security instruments. Hawaiians use judicial foreclosures rather than powers of sale for both mortgages and agreements of sale. These foreclosures take 6-12 months and sometimes more, depending upon court schedules. Title companies issue ALTA owner’s and lender’s policies and make numerous endorsements available. Buyers and sellers split escrow fees. Sellers pay the title search costs and the conveyance tax. Buyers pay title insurance premiums for the owner’s and lender’s policies. Property taxes come due twice a year, on February 20th and again on August 20th.

IDAHO

Closings are handled through escrow. Conveyance is by warranty deed or corporate deed, though often there are contracts of sale involved. Either mortgages or deeds of trust may be the security instruments. Deeds of trust which include power of sale provisions are restricted to properties in incorporated areas and properties elsewhere which don’t exceed 20 acres. After the notice of default has been recorded, deed-of-trust foreclosures take at least 120 days, and there’s no redemption period. Judicial foreclosures for mortgages take about a year, depending upon court availability, and there’s a 6-12 month redemption period after that, depending on the type of property involved. Idahoans use ALTA policies and various endorsements. Buyers and sellers split escrow costs in general and negotiate who’s going to pay the title insurance premiums. There are no documentary taxes, mortgage taxes, or transfer taxes, but there are property taxes, and they’re due annually in November and delinquent on December 20th or semiannually on December 20th and June 20th. Idaho is a community-property state.

ILLINOIS

Title companies, lenders, and attorneys may conduct closings, but only attorneys may prepare documents. Lenders generally hire attorneys and have them prepare all the paperwork. Conveyance is by warranty deed. Recorded deeds must include a declaration of the sales price. Mortgages are the customary security instruments. Judicial foreclosure is mandatory and takes at least a year from the filing of the default notice to the expiration of the redemption period. Illinoisans use ALTA policies. Buyers usually pay the closing costs and the lender’s title insurance premiums; sellers pay the owner’s title insurance premiums and the state and county transfer taxes. Property tax payment dates vary. Larger counties typically schedule them for March 1st and September 1st, and smaller counties schedule them for June 1st and September 1st.

INDIANA

Title companies, lenders, real estate agents, and attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Judicial foreclosures are required; execution of judgments varies from 3 months after filing of the complaint in cases involving mortgages drawn up since July 1, 1975, to 6 months for those drawn up between January 1, 1958, and July 1, 1975, to 12 months for those drawn up before that. Immediately following the execution sale, the highest bidder receives a sheriff’s deed. Hoosiers use ALTA policies and certain endorsements. Buyers usually pay closing costs and the lender’s title insurance costs, while sellers pay for the owner’s policy. There are no documentary, mortgage, or transfer taxes. Property taxes fall due on May 10th and November 10th.

IOWA

Attorneys may conduct closings, and so may real estate agents. Conveyance is usually by warranty deed. Mortgages and deeds of trust are both authorized security instruments, but lenders prefer mortgages because deeds of trust do not circumvent judicial foreclosure proceedings anyway. Those proceedings take at least 4 -6 months. Since Iowa is the only state which does not authorize private title title insurance, Iowans who want it must go through a state administered title company or fund. Buyers and sellers share the closing costs; sellers pay the documentary taxes. Property taxes are due July 1st based upon the previous January’s assessment.

KANSAS

Title companies, lenders, real estate agents, attorneys, and independent escrow firms all conduct closings. Anyone who conducts a title search must be a licensed abstracter, a designation one receives after passing strict tests and meeting various requirements. Because many land titles stem from Indian origins, deeds involving Indians as parties to a transaction go before the Indian Commission for approval. Conveyance is by warranty deed. Mortgages are the customary security instruments. Judicial foreclosures, the only ones allowed, take about 6 months from filing to sale. Redemption periods vary, the longest being 12 months. Kansans use ALTA policies and endorsements. Buyers and sellers divide closing costs. Buyers pay the lender’s policy costs and the state mortgage taxes; sellers pay for the owner’s policy. Property taxes come due November 1st, but they needn’t be paid in a lump sum until December 31st. They may also be paid in two installments, the first on December 20th and the second on June 20th.

KENTUCKY

Attorneys conduct closings. Conveyance is by grant deed or by bargain-and-sale deed. Deeds must show the name of the preparer, the amount of the total transaction, and the recording reference by which the grantor obtained title. Mortgages are the principal security instruments because deeds of trust offer no power-of-sale advantages. Enforcement of any security instrument requires a decree in equity, a judicial foreclosure proceeding. Kentuckians use ALTA policies and endorsements. Sellers pay closing costs; buyers pay recording fees. Responsibility for payment of title insurance premiums varies according to locale. Property taxes are payable on an annual basis; due dates vary from county to county.

LOUISIANA

Either attorneys or corporate title agents may conduct closings, but a notary must authenticate the documentation. Conveyance is by warranty deed or by act of sale. Mortgages are the security instruments generally used in commercial transactions, while vendor’s liens and seller’s privileges are used in other purchase money situations. Foreclosures are swift (60 days) and sure (no right of redemption). Successful foreclosure sale bidders receive an adjudication from the sheriff. Louisianians use ALTA owner’s and lender’s policies and endorsements. Buyers generally pay the title insurance and closing costs. There are no mortgage or transfer taxes. Property tax payment dates vary from parish to parish (parishes are like counties). Louisiana is a community-property state.

MAINE

Attorneys conduct closings. Conveyance is by warranty or quitclaim deed. Mortgages are the security instruments. Foreclosures may be initiated by any of the following: an act of law for possession; entering into possession and holding the premises by written consent of the mortgagor; entering peaceably, openly, and unopposed in the presence of two witnesses and taking possession; giving public notice in a newspaper for three successive weeks and recording copies of the notice in the Registry of Deeds, and then recording the mortgage within 30 days of the last publication; or by a bill in equity (special cases). In every case, the creditor must record a notice of foreclosure within 30 days. Judicial foreclosure proceedings are also available. Redemption periods vary from 90-365 days depending on the method of foreclosure. Mainers use ALTA owner’s and lender’s policies and endorsements. Buyers pay closing costs and title insurance fees; buyers and sellers share the documentary transfer taxes. Property taxes are due annually on April 1st.

MARYLAND

Attorneys conduct closings, and there has to be a local attorney involved. Conveyance is by grant deed, and the deed must state the consideration involved. Although mortgages are common in some areas, deeds of trust are more prevalent as security instruments. Security instruments may include a private power of sale, so it naturally is the foreclosure method of choice. Marylanders use ALTA policies and endorsements. Buyers pay closing costs, title insurance premiums, and transfer taxes. Property taxes are due annually on July 1st. Police officers in Prince George’s County who are first-time home buyers get a break on their transfer taxes at closing under a law that took effect July 1, 2006. Officers pay 1 percent of the purchase price rather than 14%, the regular rate. County school teachers were made eligible for the same tax break in an earlier law without the first-time buyer limitation. Teachers must commit to living in the house for at least three years and maintain their teaching position with the county during that time.

MASSACHUSETTS

Attorneys handle closings. Conveyance is by warranty deed in the western part of the state and by quitclaim deed in the eastern part. Mortgages with private power of sale are the customary security instruments. Creditors forced to foreclose generally take advantage of the private power of sale, but they may foreclose through peaceable entry (entering unopposed in the presence of two witnesses and taking possession for 3 years) or through the rarely used judicial writ of entry. Frequently, cautious creditors will foreclose through both power of sale and peaceable entry. People in Massachusetts use ALTA owner’s and lender’s title insurance policies and endorsements. Buyers pay closing costs and title insurance fees, except in Worcester, where sellers pay. Sellers pay the documentary taxes. Property taxes are payable in two installments, November 1st and May 1st.

MICHIGAN

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed which must give the full consideration involved or be accompanied by an affidavit which does. Many transactions involve land contracts. Mortgages are the security instruments. Private foreclosure is permitted; it requires advertising for 4 consecutive weeks and a sale at least 28 days following the date of first publication. The redemption period ranges from 1 to 12 months. Michiganders use ALTA policies and endorsements. Buyers generally pay closing costs and the lender’s title insurance premium, and sellers pay the state transfer tax and the owner’s title insurance premium. Those property taxes which pay for city and school expenses fall due July 1st; others (county taxes, township taxes, and some school taxes) fall due on the first of December. In many tax jurisdictions, taxpayers may opt to pay their taxes in two equal installments without penalty.

MINNESOTA

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed. Although deeds of trust are authorized, mortgages are the customary security instruments. The redemption period following a foreclosure is 6 months in most cases; it is 12 months if the property is larger than 10 acres or the amount claimed to be due is less than 2/3 of the original debt. This is a strong abstract state. Typically a buyer will accept an abstract and an attorney’s opinion as evidence of title, even though the lender may require title insurance. People in the Minneapolis-St. Paul area use the Torrens system. Minnesotans use ALTA policies. Buyers pay the lender’s and owner’s title insurance premiums and the mortgage tax. Sellers usually pay the closing fees and the transfer taxes. Property taxes are due on May 15th and October 15th.

MISSISSIPPI

Attorneys conduct real estate closings. Conveyance is by warranty deed. Deeds of trust are the customary security instruments. Foreclosure involves a non-judicial process which takes 21-45 days. Mississippians use ALTA policies and endorsements. Buyers and sellers negotiate the payment of title insurance premiums and closing costs. There are no documentary, mortgage, or transfer taxes. Property taxes are payable on an annual basis and become delinquent February 1st.

MISSOURI

Title companies, lenders, real estate agents, and attorneys may conduct closings. In the St. Louis area, title company closings predominate. In the Kansas City area, an escrow company or a title company generally conducts the closing. Conveyance is by warranty deed. Deeds of trust are the customary security instruments and allow private power of sale. The trustee must be named in the deed of trust and must be a Missouri resident. Foreclosure involves publication of a sale notice for 21 days, during which time the debtor may redeem the property or file a notice of redemption. The foreclosure sale buyer receives a trustee’s deed. Missourians use ALTA policies and endorsements. Buyers and sellers generally split the closing costs. Sellers in western Missouri usually pay for the title insurance polices, while elsewhere the buyers pay. There are no documentary, mortgage, or transfer taxes. Property taxes are payable annually and become delinquent January 1st for the previous year.

MONTANA

Real estate closings are handled through escrow. Conveyance is by warranty deed, corporate deed, or grant deed. Mortgages, deeds of trust, and unrecorded contracts of sale are the security instruments. Mortgages require judicial foreclosure, and there’s a 6-12-month redemption period following sale. Foreclosure on deeds of trust involves filing a notice of default and then holding a trustee sale 120 days later. Montanans use ALTA policies and endorsements. Buyers and sellers split the escrow and closing costs; sellers usually pay for the title insurance policies. There are no documentary, mortgage, or transfer taxes. Montanans may pay their property taxes annually by November 30th or semi-annually by November 30th and May 31st.

NEBRASKA

Title companies, lenders, real estate agents, and attorneys all conduct closings. Conveyance is by warranty deed. Mortgages and deeds of trust are the security instruments. Mortgage foreclosures require judicial proceedings and take about 6 months from the date of the first notice when they’re uncontested. Deeds of trust do not require judicial proceedings and take about 90 days. Nebraskans use ALTA policies and endorsements. Buyers and sellers split escrow and closing costs; sellers pay the state’s documentary taxes. Property taxes fall due April 1st and August 1st.

NEVADA

Escrow similar to California’s is used for closings. Conveyance is by grant deed, bargain-and-sale deed, or quitclaim deed. Deeds of trust are the customary security instruments. Foreclosure involves recording a notice of default and mailing a copy within 10 days. Following the mailing there is a 35-day reinstatement period. After that, the beneficiary may accept partial payment or payment in full for a 3-month period. Then come advertising the property for sale for 3 consecutive weeks and finally the sale itself. All of this takes about 4 1/2 months. Nevadans use both ALTA and CLTA policies and endorsements. Buyers and sellers share escrow costs. Buyers pay the lender’s title insurance premiums; sellers pay the owner’s and the state’s transfer tax. Property taxes are payable in one, two, or four payments, the first one being due July 1st. Nevada is a community-property state.

NEW HAMPSHIRE

Attorneys conduct real estate closings. Conveyance is by warranty or quitclaim deed. Mortgages are the customary security instruments. Lenders may foreclosure through judicial action or through whatever power of sale was written into the mortgage originally. Entry, either by legal action or by taking possession peaceably in the presence of two witnesses, is possible under certain legally stated conditions. There is a one-year right-of-redemption period. The people of New Hampshire use ALTA owner’s and lender’s policies. Buyers pay all closing costs and title fees except for the documentary tax; that’s shared with the sellers. Property tax payment dates vary across the state.

NEW JERSEY

Attorneys handle closings in northern New Jersey, and title agents customarily handle them elsewhere. Conveyance is by bargain-and-sale deed with covenants against grantors’ acts (equivalent to a special warranty deed). Mortgages are the most common security instruments though deeds of trust are authorized. Foreclosures require judicial action which take 6-9 months if they’re uncontested. New Jerseyites use ALTA owner’s and lender’s policies. Both buyer and seller pay the escrow and closing costs. The buyer pays the title insurance fees, and the seller pays the transfer tax. Property taxes are payable quarterly on the first of April, July, October, and January.

NEW MEXICO

Real estate closings are conducted through escrows. Conveyance is by warranty or quitclaim deed. Deeds of trust and mortgages are the security instruments. Foreclosures require judicial proceedings, and there’s a 9-month redemption period after judgment. New Mexicans use ALTA owner’s policies, lender’s policies, and construction and leasehold policies; they also use endorsements. Buyers and sellers share escrow costs equally; sellers pay the title insurance premiums. There are no documentary, mortgage, or transfer taxes. Property taxes are payable November 5th and April 5th. New Mexico is a community-property state.

NEW YORK

All parties to a transaction appear with their attorneys for closing. Conveyance is by bargain-and-sale deed. Mortgages are the security instruments in this lien-theory state. Foreclosures require judicial action and take several months if uncontested or longer if contested. New Yorkers use policies of the New York Board of Title Underwriters almost exclusively, though some use the New York State 1946 ALTA Loan Policy. Buyers generally pay most closing costs, including all title insurance fees and mortgage taxes. Sellers pay the state and city transfer taxes. Property tax payment dates vary across the state.

NORTH CAROLINA

Attorneys or lenders may handle closings, and corporate agents issue title insurance. Conveyance is by warranty deed. Deeds of trust with private power of sale are the customary security instruments. Foreclosures are non-judicial, with a 10-day redemption period following the sale. The entire process takes between 45 and 60 days. North Carolinians use ALTA policies, but these require an attorneys opinion before they’re issued. Buyers and sellers negotiate the closing costs, except that buyers pay the recording costs, and sellers pay the document preparation and transfer tax costs. Property taxes fall due annually on the last day of the year.

NORTH DAKOTA

Lenders, together with attorneys, conduct closings. Conveyance is by warranty deed. Mortgages are the security instruments. Foreclosures require about 6 months, including the redemption period. North Dakotans base their title insurance on abstracts and attorneys’ opinions. Buyers usually pay for the closing, the attorney’s opinion, and the title insurance; sellers pay for the abstract. There are no documentary or transfer taxes. Property taxes are due March 15th and October 15th.

OHIO

Title companies and lenders handle closings. Conveyance is by warranty deed. Dower rights require that all documents involving a married person must be executed by both spouses. Mortgages are the security instruments. Judicial foreclosures, the only kind allowed, require about 6-12 months. People in Ohio use ALTA policies; they get a commitment at closing and a policy following the recording of documents. Buyers and sellers negotiate who’s going to pay closing costs and title insurance premiums, but sellers pay the transfer taxes. Property tax payment dates vary throughout the state.

OKLAHOMA

Title companies, lenders, real estate agents, and attorneys may conduct closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may be by judicial action or by power of sale if properly allowed for in the security instrument. Oklahomans use ALTA policies and endorsements. Buyers and sellers share the closing costs, except that the buyer pays the lender’s policy premium, the seller pays the documentary transfer tax, and the lender pays the mortgage tax. Property taxes may be paid annually on or before the last day of the year or semi-annually by December 31st and March 31st.

OREGON

Closings are handled through escrow. Conveyance is by warranty or bargain-and-sale deed, but land sales contracts are common. Mortgage deeds and deeds of trust are the security instruments. Oregon attorneys usually act as trustees in non-judicial trust-deed foreclosures. Such foreclosures take 5 months from the date of the sale notice; defaults may be cured as late as 5 days prior to sale. Judicial foreclosures on either mortgages or trust deeds allow for a one-year redemption period following sale. Oregonians use ALTA and Oregon Land Title Association policies. Buyers and sellers split escrow costs and transfer taxes; the buyer pays for the lender’s title insurance policy, and the seller pays for the owner’s policy. Property taxes are payable the 15th of November, February, and May; if paid in full by November 15th, owners receive a 3% reduction.

PENNSYLVANIA

Title companies, real estate agents, and approved attorneys may handle closings. Conveyance is by special or general warranty deed. Mortgages are the security instruments. Foreclosures take 1-6 months from filing through judgment plus another 2 months or more from judgment through sale. State law restricts aliens in owning real property with respect to acreage and income and includes special restrictions affecting farmland. Pennsylvanians use ALTA owner’s, lender’s, and leasehold policies. Buyers pay closing costs and title insurance fees; buyers and sellers split the transfer taxes. Property tax payment dates differ across the state.

RHODE ISLAND

Attorneys usually conduct closings, but banks and title companies may also conduct them. Conveyance is by warranty or quitclaim deed. Mortgages are the usual security instruments. Foreclosures follow the power-of-sale provisions contained in mortgage agreements and take about 45 days. Power-of-sale foreclosures offer no redemption provisions, whereas any other foreclosure method carries a 3-year right of redemption. Rhode Islanders use ALTA policies and endorsements. Buyers pay title insurance premiums and closing costs; sellers pay documentary taxes. Property taxes are payable annually, semi-annually, or quarterly with the first payment due in July.

SOUTH CAROLINA

Attorneys customarily handle closings. Conveyance is by warranty deed. Mortgages are most often the security instruments. Foreclosures are judicial and take 3-5 months depending on court schedules. Foreclosure sales take place on the first Monday of every month following publication of notice once a week for 3 consecutive weeks. South Carolinians use owner’s and lender’s ALTA policies and endorsements. Buyers pay closing costs, title insurance premiums, and state mortgage taxes; sellers pay the transfer taxes. Property tax payment dates vary across the state from September 15 to December 31.

SOUTH DAKOTA

Title companies, lenders, real estate agents, and attorneys may handle closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may occur through judicial proceedings or through the power-of-sale provisions contained in certain mortgage agreements. Sheriff’s sales follow publication of notice by 30 days. The redemption period allowed after sale of parcels smaller than 40 acres and encumbered by mortgages containing power of sale is 180 days; in all other cases, it’s a year. There’s a unique statute which stipulates that all land must be platted in lots or described by sectional references rather than by metes and bounds unless it involves property described in documents recorded prior to 1945. There’s another unique statute called the Affidavit of Possession Statute. Certain exceptions aside, it provides that any person having an unbroken chain of title for 22 years thereafter has a marketable title free of any defects occurring prior to that 22-year period. South Dakotans use ALTA policies and endorsements. Sellers pay the transfer taxes and split the other closing costs, fees, and premiums with the buyers. Property taxes come due May 1st and November 1st.

TENNESSEE

A title company attorney, a party to the contract, a lender’s representative, or an outside attorney may conduct a closing. Conveyance is by warranty or quitclaim deed. Deeds of trust are the customary security instruments. Foreclosures, which are handled according to trustee sale provisions, are swift, that is, 22 days from the first publication of the notice until the public sale, and there is normally no right of redemption after that. Tennesseans use ALTA policies and endorsements. The payment of title insurance premiums, closing costs, mortgage taxes, and transfer taxes varies according to local practice. Property taxes are payable annually on the first Monday in October.

TEXAS

Title companies normally handle closings. Conveyance is by warranty deed. Deeds of trust are the most common security instruments. Following the posting of foreclosure sales at the local courthouse for at least 21 days, the sales themselves take place at the courthouse on the first Tuesday of the month. Texans use only Texas standard policy forms of title insurance. Buyers and sellers negotiate closing costs. There aren’t any documentary, transfer, or mortgage taxes. Property taxes notices are send around October 1st, but are not due until the end of the year. Texas is a community-property state.

UTAH

Lenders handle about 60% of the escrows and title companies handle the rest. Conveyance is by warranty deed. Mortgages and deeds of trust with private power of sale are the security instruments. Mortgage foreclosures require judicial proceedings which take about a year; deed-of-trust foreclosures take advantage of private power-of-sale provisions and take about 4 months. Utahans use ALTA owner’s and lender’s policies and endorsements. Buyers and sellers split escrow fees, and sellers pay the title insurance premiums. There are no documentary, transfer, or mortgage taxes. Property taxes are payable November 30th.

VERMONT

Attorneys take care of closings. Conveyance is by warranty or quitclaim deed. Mortgages are the customary security instruments, but large commercial transactions often employ deeds of trust . Mortgage foreclosures require judicial proceedings for „strict foreclosure‰; after sale, there is a redemption period of one year for mortgages dated prior to April 1, 1968, and 6 months for all others. Vermonters use ALTA owner’s and lender’s policies and endorsements. Buyers pay recording fees, title insurance premiums, and transfer taxes. Property tax payment dates vary across the state.

VIRGINIA

Attorneys and title companies conduct real estate closings. Conveyance is by bargain-and-sale deed. Deeds of trust are the customary security instruments. Foreclosure takes about 2 months. Virginians use ALTA policies and endorsements. Buyers pay the title insurance premiums and the various taxes. Property tax payment dates vary.

WASHINGTON

Title companies, independent escrow companies, lenders, and attorneys may handle escrows. An attorney must prepare real estate documents, but there is a limited practice rule which lets licensed non-attorneys prepare most of the commonly used real estate documents. Conveyance is by warranty deed. Both deeds of trust with private power of sale and mortgages are used as security instruments. Mortgages require judicial foreclosure. Deeds of trust require that a notice of default be sent first and 30 days later, a notice of sale. The notice of sale must be recorded, posted, and mailed at least 90 days before the sale, and the sale cannot take place any earlier than 190 days after the actual default. Sellers generally pay the title insurance premiums and the revenue tax; buyers and sellers split everything else. Property taxes are payable April 30th and October 31st. Washington is a community-property state.

WEST VIRGINIA

Attorneys conduct escrow closings, although lenders and real estate agents do them occasionally. Conveyance is by warranty deed, bargain-and-sale deed, or grant deed. Deeds of trust are the customary security instruments. Foreclosures are great for lenders; when uncontested, they take only a month. West Virginians use ALTA policies and endorsements. Buyers pay the title insurance premiums and sellers pay the documentary taxes; they divide the other closing costs. Property taxes may be paid in a lump sum after July 6th or in two installments on September 1st and March 1st.

WISCONSIN

Lenders and title companies conduct what are called “table closings” throughout the state, except in the Milwaukee area, where attorneys conduct the closings. Conveyance is by warranty deed, but installment land contracts are used extensively, too. Mortgages are the customary security instruments. Within limits, the actual mortgage wording determines foreclosure requirements; redemption varies from 2 months for abandoned property to a full year in some cases. Lenders generally waive their right to a deficiency judgment in order to reduce the redemption period to 6 months. Wisconsinites use ALTA policies and endorsements. Buyers generally pay closing costs and the lender’s policy fees; sellers pay the owner’s policy fees and the transfer taxes. In transactions involving homesteads, conveyances may be void if not joined into by the spouse. Property taxes may be paid in full on February 28th, or they may be paid half on January 31st and half on July 31st. Wisconsin is a quasi-community-property state.

WYOMING

Real estate agents generally conduct closings. Conveyance is by warranty deed. Mortgages are the usual security instruments. Foreclosures may follow judicial or power-of-sale proceedings. Residential foreclosures take around 120 days; agricultural foreclosures, around 13 months. Wyomingites use ALTA owner’s and lender’s policies and endorsements. Buyer and seller negotiate who’s going to pay the various closing costs and title insurance fees. There are no documentary, mortgage, or transfer taxes. Property taxes may be paid annually December 31st or semi-annually September 1st and March 1st.

How Closings Are Handled State by State

Real estate closings may be handled by escrow companies, title companies, lawyers, or a combination of one or more of those. Some lenders may have their own closing department. A revised explanation of how a real estate closing will be handled in your state can be found in the new up-dated 2nd edition of The Complete Guide to Your Real Estate Closing, now available at www.amazon.com or www.sandygadow.com/order.html. You will find a complete listing of how an escrow closing is handled in every state, which will include where to make a complaint, an estimate of the fees you will have to pay, and who will do what in the closing.

Here is a Sample:

Alabama
Attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are non-judicial. Foreclosure notices are published once a week for three weeks, county by county. The foreclosure process takes a minimum of 21 days from the date of first publication. After the sale, there is a one-year redemption period. Alabamans use ALTA policies to insure titles. Buyers and sellers negotiate who’s going to pay the closing costs and usually split them equally. Property taxes are due and payable annually on October 1.

Consumer Complaints:

Banking Department

401 Adams Avenue, Suite 680 Montgomery, AL 36130-1201 334-242-3452
Fax: 334-242-3500
Web: www.bank.state.al.us
David Parsons, Acting Commissioner Alabama Department of Insurance 201 Monroe Street, Suite 1700
P.O. Box 303351 Montgomery, AL 36104 334-269-3550
Fax: 334-241-4192
E-mail: insdept@insurance.state.al.us Web: www.aldoi.org

Alabama Real Estate Commission 1201 Carmichael Way Montgomery, AL 36106-4350 334-242-5544, TTY: 334-396-0064 Fax: 334-270-9118
E-mail: arec@arec.state.al.us Web: www.arec.state.al.us

Rate filing statute: File and use Customary title fee splits: Owner’s policy: Negotiable Lender’s policy: Buyer
Title search: Negotiable Transfer taxes: Buyer
Transfer Tax based on appraised value not on sale price.
Closing fees: Negotiable Recording fees: Buyer
Real estate transfer disclosure required? No Agency relationship disclosure required: Required by time of purchase offer.

How to Choose a Title Insurance Company

Choosing the right escrow officer or title attorney to handle your sale can mean the difference between a smooth and rapid closing or a complicated, delayed closing, fraught with anguish. Most often either the buyer or seller may choose the closing agent, depending on your local custom, but whoever it is, there are several important criteria which should be considered.

Selecting an escrow closing agent, whether it be an escrow officer in an independent escrow office or a real estate attorney in a law firm or title company, is a choice which should be made carefully. This choice will be one of the most important steps in your escrow and closing process as you will be working closely with this person, often daily, throughout the entire 30 or 60 day period of your real estate sale or purchase. Whoever you choose, that person will become your personal secretary, complying with the terms and conditions of your instructions, and they will keep your funds safely deposited in an escrow account. They will strive to be as confidential as possible, answer your questions, and clear up any title problems which may arise.

Let’s look at four important criteria to consider when choosing an escrow officer or title attorney. The first criteria is the reputation of the company in the community. The first place to begin your search is to ask your friends and acquaintances who have had recent experience with real estate transactions to recommend a company or an individual they have been pleased with, one who met all their expectations. Inquire among friends as to the reputation of the individual officer or title company in your local community. Ask your friends if the escrow agent they recommend returns phone calls promptly, explains details in everyday, understandable language, inspires confidence, and is knowledgeable and acts in a professional, courteous manner.

The second criteria to look at is the managerial experience of the escrow agent you are choosing. Look at the professionalism in the escrow agent or title company you are considering. Your escrow agent should be knowledgeable, efficient, friendly, and confidential. Above all else, ask lots of questions when interviewing your potential escrow closing agent. Ask about their previous experience. Have they handled many FSBO transactions? Do they have a good working relationship with lenders and are they experienced in handling loan documents? Do they have experience in handling possible title problems that may be found in the title report?

The next criteria which we will consider is the location of the office of the closing or escrow agent. Since you will have to visit the escrow agent’s office in person at least once and perhaps several times to prove your identity, sign numerous papers, and deliver or pick up a check, try to select an agent with an office conveniently located near your home or work so you can reach it during normal business hours in just a few minutes.

The final criteria to consider is the fees that your escrow or closing agent is going to charge. Fees charged by escrow agents and closing attorneys do vary, and the decision on who pays which fees will also vary from state to state. The seller may be paying for the title insurance, as in Florida, for example, or the buyer may be paying the escrow fees, as in California. Whoever is responsible for paying for each individual fee should be determined well ahead of the closing, and before you choose your escrow or title agent. You will want to try to select the most reputable and professional escrow or closing agent you can find, combined with the one who also charges the most reasonable fees. Several fees, such as recording fees, transfer tax fees, are non-negotiable and will be the same statewide. Title insurance fees and escrow fees can vary from company to company.

You can expect your escrow officer or closing agent to do several specific things for you. Included in the cost of the escrow and title fee will be the following: ordering of the preliminary title report, securing payoff demands/and or beneficiary statements from existing lenders and requesting full reconveyances of any deed of trust or mortgages to be paid off in escrow, obtaining instructions and loan documents from the new lender, obtaining documents to clear any outstanding liens against the property, issuing receipts for deposits of documents and holding funds in a separate account, prorating taxes, interest, rents, etc., preparing buyers and seller’s escrow instructions and seeing that all documents are properly executed, determining when everything is going to be completed so the transaction can close, obtaining title insurance for the buyer and or the lender, arranging timely transfer of the fire insurance policy or seeing that the buyer secures a new policy, recording the necessary documents, such as grant deeds, deeds of trust, powers of attorney, substitutions of liability, and reconveyances, when all the conditions of the transaction have been met, and finally, disbursing all funds to the proper parties, delivering documents and preparing the final closing statements.

After looking at the reputation of the escrow or title company in the community, the managerial experience of the office, the location of the office and the fees charged, choose the closing or escrow agent that you would feel most comfortable working with, asking questions, going over documents and discussing all aspects of your closing process with in detail. Your choice of escrow or closing agent may be one of the most important decisions you make to arrive at your final goal of a timely real estate sale or purchase.

Is Title Insurance A Worthy Investment?

Evelyn Hunter wanted to deed a small condominium apartment in Pasadena, Ca., to her grandchildren. Because this property transfer was among relatives, Ms. Hunter didn’t see the need to obtain title insurance, a one-time premium paid to a title company that guarantees that you own a particular piece of property and that no one else has a claim to that property. After all, Ms. Hunter had owned the apartment for 15 years and hadn’t had any problems during that time. Although she wasn’t legally required to purchase a title insurance policy for her grandchildren, Ms. Hunter should have considered doing so. Several years later her granddaughter decided to sell the property and a title search revealed there was a flaw in the chain of title going back before Ms. Hunter had purchased the property. It took over a year and a half with a cost of several thousand dollars in legal fees to resolve the problem. If Ms. Hunter had purchased title insurance for her granddaughter, she would have been covered for any expenses to correct the problem.

Unlike fire or property hazard insurance, which insures against events which could occur in the future, title insurance covers events which have taken place in the past, such as forged documents, incorrect easement descriptions or a lack of legal authority to sign documents. In Mr. Hunter’s situation, there were problems with the former owners that she was not aware of. People often think nothing can go wrong with the title to their property after they have the deed in hand. After all, everything may seem official – the deed has been recorded at the county recorder’s office; an examination of the property shows no visible signs of encroachment or lien problems and walking the property to verify the survey shows no obvious boundary disputes. Perhaps you’ve even searched county records to check for problems and found none. (Note that the risk of doing this search yourself is that you would have to be able to interpret correctly the recorded ownership information that you find). But, if just one judgment or lien against the property has been over-looked, which can happen even when expert title examiners do these searches, it could be very costly and create problems later for an owner.

After seeing an advertisement for a commercial property located in Sebastopol, Ca. Matt and Kristen Stevens decided to make an offer on the property. The modest building, with two retail stores and a small customer parking lot, seemed like an ideal investment. Inexperienced in commercial property and city parking requirements, the Stevens assumed that the parking lot provided adequate spaces for the building. They purchased the property and obtained a polity of title insurance to protect their interests.

What was not readily apparent was that half of the parking spaces were located on an adjoining neighbor’s property, and an easement had been created and described in the Stevens’ deed which gave the Stevens the right to jointly share in the use of this easement. A city ordinance required them to provide a certain number of parking spaces for their tenants. The Stevens were sure they had enough spaces with the half of the parking lot they owned and the half which they shared with their neighbor.

After several months of ownership, the neighbor told them that he really owned part of the parking easement, and this property was included in his deed. The Stevens’ tenants could not use his land for parking for their customers. The Stevens were now in jeopardy of losing the occupancy permit on their building because they could not provide the required number of parking spaces. An error had been made in the boundary description of the easement. The Stevens weren’t sure where to turn for help, so they contacted a lawyer, who suggested they make a claim to the title company which issued their policy of title insurance.

The title company was responsible for investigating the matter and ended up negotiating with the Stevens’ neighbor to resolve the problem. The title company offered to buy the additional parking spaces from the neighbor, adding the land to the Stevens’ deed. The couple now owned the additional spaces and the occupancy permit was valid and the tenants could continue in business. The purchase price for the parking spaces alone well exceeded the cost of the title insurance policy.

What Types of Title Insurance Are Available?

There are two basic types of insurance: an owner’s policy and a lender’s policy. The owner’s policy is normally written for the amount of the purchase price of the property and contains basic coverage, which can be expanded by adding endorsements. An endorsement is additional coverage, which can be added to the title insurance policy to cover specific events. The lender’s policy is written to cover the amount of the loan and contains several items which an owner’s policy does not include. Your lender will require you to obtain both types of title insurance if you are using a mortgage to finance your property purchase.

What Types of Risks Does An Owner’s Policy Cover?

A standard owner’s policy covers such risks as:

Forgery and impersonation;
Lack of competency, capacity or legal authority of a party;
Undisclosed or missing heirs;
Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner);
Undisclosed (but recorded) easement or use restriction;
Missing interpretation of wills;
Erroneous or inadequate legal descriptions;
Lack of right of access; and/or
Deed not properly recorded

What Additional Coverage Does A Lender’s Policy Include?

An expanded lender’s policy will cover:

Off-recorded matters, such as unrecorded easements;
Deed to land with building encroaching on land of another;
Incorrect survey
Claims to water and mineral rights
Silent off-record terms (such as mechanics’ or estate-tax liens); and/or
Pre-existing violations of subdivision laws, zoning ordinances or covenants, conditions, and restrictions.

Lenders often require endorsements to cover such items as violations of the covenants, conditions, and restrictions which limit the use of land and regulation of the type and location of improvements. Lenders may order an endorsement to cover encroachments made by property improvements which may extend onto a neighbor’s property. There are many other endorsements available, each suited to a particular situation or occurrence. After an inspection of your property, the lender will determine which added protections are needed to protect their interest.

What Is The Cost of Title Insurance?

The cost of a title insurance policy varies from state to state, in part because states differ in how much they regulate title insurance fees. Some states, such as Florida, set a minimum title insurance rate, called a “promulgated rate,” in order to establish a base rate that title companies and attorney must charge. Insurance providers in other states, such as California, must file their fees with the state’s insurance commissioner, and once filed, must adhere to those fees.

How Long Does Title Insurance Remain In Effect?

Once written, title insurance remains in effect for as long as you own the property, so it is important to choose wisely when reviewing the coverage afforded by your policy. The cost of title insurance in minimal when you consider the protection it provides. You probably will never have to file a claim, but in the event you do, you will be glad you have this valuable insurance.

Can I Transfer The Title Insurance To A New Owner?

No, title insurance is not transferable or assumable by a new owner to the property. It terminates once legal title changes.

How your Title Insurance Dollar is Divided Up

Often misunderstood, title insurance is viewed by many home buyers as an unusually high expense in comparison to other closing costs in their real estate transaction. Lender costs are generally accepted, as borrowers realize they are getting something valuable for their money, a mortgage to purchase the property. City or county transfer taxes are accepted, as they are a non-negotiable requirement of most real property transfers. Buyers understand and pay for fire or hazard insurance policies on their property, anticipating the policy will reimburse them in case of a loss. Why then are title insurance premiums, a one-time charge for a title policy lasting an indefinite period of time, often considered not worthy of the cost?

Melanie and Bill Murphy, grudgingly paid out $950.00 to purchase title insurance on a $250,000.00 home they were buying in Richmond, Virginia. As required by their lender, the Murphys also purchased a lender’s policy to protect the mortgage holder’s interest in the property. Realizing that title insurance was a necessity, Melanie and Bill wanted to have this protection, but the cost seemed high to them in comparison to other closing costs. The Murphys understood the $875.00 fee for fire insurance, and were comfortable paying that charge. But Bill hadn’t heard of any of his friends having to make a title insurance claim, and he wondered how valuable that policy really was. Bill had doubts that he was getting value for his dollar in purchasing the title insurance policy.

Homebuyers may be confused as to where their title insurance dollar goes. Looking at the statistics, title insurers paid out $487 million in claims thru the 3rd quarter of 2004, $662 million in 2003 and $583 million in 2002. While the amount paid out in claims is rising every year, historically title insurance claims represent between 4-6% of the total revenue collected. It would seem logical that the higher percentage of claims that an insurance company pays out, the better value the insured is getting for his money. With title insurance the opposite is true.

Title insurance is based on the theory of “loss prevention” which means that the greatest amount of time, and money, is spent preventing title problems from ever occurring in the first place. According to an American Land Title Association (ALTA) survey, one out of every four real estate transactions shows evidence of title problems. You may not even be aware that a problem exists, as title companies make every effort to ensure the property is free of all possible title problems before issuing the policy of title insurance.

Preventing potential loss and subsequent claims is a highly labor-intensive, and expensive, component of a title company’s operating budget. One reason is that in order to maintain current records, which are critical to the accuracy of a title search, new documents must be up-dated and indexed daily. Skilled and trained researchers and underwriters must interpret the effects of these documents on the title. Forged documents, one of the most common title problems found, in addition to falsified documents, invalid deeds, and incorrect property descriptions, are just some of the title issues which must be examined. Other title risks include recording mistakes, deed indexing errors, unpaid mechanics’ liens, judgment liens, income tax or property tax liens, undisclosed easements, claims by missing heirs, and claims by ex-spouses.

The cost of a title insurance policy relative to the cost of a property transaction is about one-half to one percent of the purchase price. The premium price is based on five factors, starting with the largest percentage and descending to the smallest.

The cost of maintaining current title information on property local to that operation, the “title plant”
The cost of searching and examining the title to subject properties
The cost to resolve or clear defects to the title
The claims costs covering title defects, including legal fees
The allowance for a reasonable profit

The average expense ratio for a title company is greater than 90%, while the expense ratio for personal property or casualty insurance is less than 30%. Adding to the expense title companies incur is the need to perform the majority of underwriting work in the state and county where the property is located. Performing title searches on a national level, which could be more cost effective, is generally not possible as laws and customs vary from state to state.

Brian Harrison, a title researcher for a local title company, was conducting a title search on a property in Plainview, New York. His search revealed a federal tax lien against John and Roberta Simmons, the Sellers, (and against the property), in the amount of $84,504.00. The Simmons’ assured Mr. Harrison that the lien had been paid off, and they produced a faded copy of an IRS form titled “Release of Levy,” which described the property and was signed by an IRS agent. Mr. Harrison went ahead and authorized the closing of Mr. and Mrs. Simmons’ property sale, without listing the tax lien as an exception of the new owner’s policy of title insurance. Shortly thereafter, the IRS threatened to execute against the property. The “Release of Levy” document which John and Roberta Simmons produced was in reality only a promise from the IRS to forego collection efforts as long as the Simmons made installment payments on the outstanding lien balance of $41, 572.00. Once the sale was finalized, the Simmons’ stopped making payments to the IRS on the tax lien. The title company was obligated to pay the full amount owing to the IRS to obtain the correct document, called a “Certificate of Release of Federal Tax Lien.” which cleared the lien from the property.

A unique benefit of title insurance is that its coverage can extend long after an owner has sold the property. This coverage was tested in the case of Mr. and Mrs. Stark of Toledo, Ohio. A judgment lien in the amount of $253,513.00 was placed on the Stark’s property and was still in place when Mr. Stark deeded the house to his wife. Mrs. Stark sold the home a short time later to Richard and Nancy Prouder. After living in the home several years, the Prouders sold the house to Henry and Edwina Miller. Nearly eight years passed before the bank who had filed the original lien started enforcement of it’s claim against Mr. Stark. The bank filed a lawsuit against the Millers, as the current owners of the home, and sought to force a sale of the house. Henry and Edwina Miller contacted their title company and learned that the bank had the right, as a judgment creditor, to file their lawsuit against the Millers, as the lien against Mr. Stark was filed during the time Mr. Stark owned the home. The title company representing Henry and Edwina Miller determined that the judgment lien had gone undetected because it was originally indexed in the local computerized title plant under the name “Stank,” instead of “Stark.” The title company insuring Henry and Edwina Miller negotiated a settlement with the bank, paying out $147,500 for an assignment of the judgment lien. Knowing that the prior owners, Richard and Nancy Prouder also had held title insurance, the Miller’s title company made a claim against the Prouders on the warranties given when they sold the home. The Prouders title company reimbursed the Miller’s title company in the amount of $145,000.00.

Although you may not be aware of the financial benefits of your title insurance policy, when a title claim is made, it is usually very significant. In may be large in terms of dollar loss, or critical in terms of property loss. Whether a claim is valid or not, your title insurance policy will cover all the legal expenses necessary to defend your title.

This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Shopping On-Line for Title Insurance

While you may want to use your local or referred title or closing company, it still may be worth your time to shop on-line to compare title insurance rates and fees. If nothing else, if you find a cheaper rate or fee, you can present this quote to your title company (or attorney) and ask them to match those discounted fees. Several on-line companies have cropped up, such as www.titleinsurance.com, www.EasyTitleQuote.com, and www.myclosingspace.com.

Each of these companies works a bit differently from the other, but basically they shop your specific transaction for competitively priced title insurance and closing costs among many title companies. One company, www.myclosingspace.com may actually handle the closing themselves. They currently have offices in Florida, New York, New Jersey and are licensed in Delaware, Massachusetts and Pennsylvania. In addition, they will attend a closing at any location of your choosing.

As with any company, you would be wise to verify the service provider you choose to be sure that is an approved title insurer by checking with your state’s Department of Insurance or with the Department of Financial Services. In addition, checking with the Better Business Bureau may reveal complaints which may steer you away from using one company over the other. Although price is a major factor in choosing a title company, good service and the ability to pay claims should also be considered.

One forward thinking state, Colorado, publishes a listing of companies in their state offering title insurance and includes a list of the title insurance premium charged by each company, county by county. Colorado law requires title entities to make insurance premiums and fees available to the public upon request, and by visiting the Colorado Division of Insurance website, www.dora.state.co.us/insurance, you can view these fees for yourself. (“All such rates or fees shall be readily available to the public in each office of the title insurance company or title insurance agent in the county to which said rates or fees apply.” http://www.ltac.org/mainpages/regs-crs.htm).

With a little bit of work, you may save yourself several hundred, perhaps even thousands, of dollars from paying the full-priced title insurance premium. You may find savings on other closings costs as well, such as escrow fees, title and search fees, document preparation fees, courier and notary fees.

This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

What is an unrecorded easement?

Easements (those rights someone else has to use part of your property) are typically recorded in the public records of the County in which the property is located, and are thus easily discernable to anyone searching in the public records. An unrecorded easement, on the other hand, are those easements which for whatever reason go unrecorded. A prescriptive easement for example, whereby a neighbor had been using the property in some way for a long time and thus created an easement may never have been recorded. An unrecorded easement is not covered by the title insurer unless an extended coverage endorsement is purchased and added to the title insurance policy.

Recorded easements generally show up in a title search performed by the title company, but unrecorded easements may show up only on a survey. If you do not have a survey done on your property, you can ask to look at the existing owners’ survey which may have been done when they purchased the property, to ascertain if any unrecorded easements are in place.

If you discover an easement, check the wording carefully. When a document grants an easement to a particular person, the restriction may terminate when he dies or sells the property. If it is granted to someone for a term of years or to someone and his “heirs and assigns,” then it probably is in effect no matter who owns the property.

This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Why do I need a survey?

While the plat map attached to your preliminary title report will show the boundaries of the property, it will not show where the house is located on the property or whether there are any encroachments on the property (such as a neighbor’s tree, driveway, or fence).
A plat map is a subdivision map prepared by developers when the tract of land and parcels were first created and will not show which easements on the property could affect legal title.

To make these determinations, you will need a survey. A survey will show you exactly where the property lines are located and whether there are any building restrictions affecting your rights. Having this information may be important if you have plans for adding a pool or a fence to the property, for example. Apart from wanting a survey to determine the location of buildings and easements on the property, you may have plans to divide up the property at a later date. Let’s say you are buying a house located on several acres of land. You have determined that local zoning law allows you to split the property into individual parcels or lots. If you think you may consider splitting the property at some later date, having a survey in hand will help you make those decisions when that time may come.

While surveys tend to be expensive, you can cut the cost down by asking the previous owner if there is an existing survey which you could look at, or asking for the previous surveyor’s name, so you can request that the old survey be up dated. You can also visit the official surveyor in the government land records office in your county, and ask one of the staff to help you with any boundary or easement questions you might have.

Most surveys do not include staking the corners of the property. If you want this done, be sure to ask for this to be done at the time the survey is performed.

Do I Need a New Title Policy When I Refinance My Mortgage?

You will not be required to obtain a new Owner’s Title policy when you refinance your mortgage, but you will be required to obtain a new “Lender’s policy” of title insurance, naming the lender as the insured. The Lender’s Policy of title insurance protects the lender for the amount of their mortgage loan. The new policy is required because any number of things could have happened to the property since the time of the last title search. Such events as tax liens, liens for unpaid child support, or mechanic’s liens can occur without the homeowner even being aware these liens exist. You may feel certain that nothing has changed since you originally purchased or refinanced your property, but the lender will have to have assurance from the title company that everything has been done to certify that the loan is fully protected. It is the lender who requires the new loan policy of title insurance and in order for a title company to issue this new policy, a new title search must be performed.

Will The Builder Pay for the Owner’s Policy of Title Insurance?

In many states it is customary for the Seller to provide the Buyer with an owner’s policy of title insurance. It is then the responsibility of the Buyer to purchase the policy of title insurance covering the lender. Customarily, the two policies of title insurance are issued “simultaneously” by the same title company and the Buyer profits from obtaining a discounted or “simultaneous issue” rate on the lender’s policy.

When purchasing property from a builder, you may find that the Builder is paying a special rate of only $25-$35.00 for the Owner’s Policy of title insurance and you will be paying a full non-discounted rate for your Lender’s policy. This is a common practice in many states in new construction. Title companies often file this Builder discounted rate of $25-$35.00 with the state insurance division for their state. After all, Builders may bring quite a bit of business to the title company and the title search may take a shorter amount of time than normal, allowing for a discounted rate.

You might want to try negotiating with the Builder on the payment of title insurance fees. Ask what rate you will be paying for the lender’s policy of title insurance. If you are being required to pay the full, non-discounted rate, you may be able to negotiate and arrange for the Builder to pay for a portion of this higher rate.

Although many builders may insist that it is customary for the Buyer to pay for all title insurance closing costs in new construction, keep in mind that title insurance fees are negotiable. Be sure to make your negotiations with the Builder clear before you sign the Purchase Agreement.

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

When Would I Use “Direct Deeding?”

When you are exchanging property under a 1031 Tax Deferred Exchange, you may choose to “direct deed” your property to the buyer or have the seller direct deed his property to you. Direct deeding is achieved by deeding your property directly to the buyer rather than to an intermediary, which initially was the common practice in 1031 tax deferred exchanges. The seller of the property which you are buying then deeds his property directly to you, skipping the deed to an intermediary.

An IRS ruling in 1990 provided that it was no longer necessary to use “sequential” deeding in a tax-deferred exchange transaction. Under sequential deeding, a deed from the Seller was given to an intermediary who then deeded the property to the buyer.

Most property transfers in tax-deferred exchanges today use “direct deeding” rather than “sequential deeding.” Using direct deeding reduces the risks involved to an intermediary, who would be in title for a short period of time and exposed to risks of liability for asbestos or other environmental hazards and the disclosures required for those risks. Direct deeding also eliminates the payment of duplicate transfer taxes which are normally charged each time a deed is recorded.

There are several safeguards you can use when direct deeding. Be sure that if you are using a qualified intermediary, that your intermediary has an agreement with your buyer for the transfer of the property to be exchanged.

Also be sure that your intermediary has an agreement with the seller of the property you will be acquiring which allows for the transfer of that replacement property to you. All parties to the agreement must be notified in writing of your intention to use an intermediary in the exchange.

If you are using a qualified intermediary in your exchange, typically the intermediary will have an affiliation with a title or escrow company, which can then provide all the services required to handle the closing, such as title insurance, escrow services, and document preparation and transfers. There are several advantages to using a professional intermediary in your exchange.

These advantages include reducing the potential liability for the structure of the exchange and any tax consequences, shielding the principals from accepting additional liability, and providing an audible trail by way of the assignments and exchange agreements.

When choosing a tax deferred exchange, be sure to be aware of the tax regulations required to qualify the exchange under IRS tax regulations. These regulations will spell out how to identify your replacement property and how many properties you can identity, how you can structure the exchange, how to direct deed your relinquished property to your buyer, how you can receive remaining cash that you may not choose to invest in the replacement property, how to receive interest on your exchange balance in addition to how to handle the closing and other transaction costs.

What Is An Attorney’s Opinion Of Title?

In some states around the country, attorneys examine the recorded documents relating to title and issue what is referred to as a “Statement of Opinion”. This statement outlines the details of the attorney’s search, which records were examined, and what encumbrances exist against the title. The attorney’s opinion of title does not insure against undisclosed defects nor does it insure marketable title. You still need title insurance to cover these defects.

Whereas under a policy of title insurance you are insured for losses due to defects in the title, subject to any exceptions stated in the policy, under an attorney’s statement of opinion, you would have to sue the attorney if a negligent mistake was found.

Generally you would have to prove that the negligence caused you to suffer losses. An attorney is normally not liable if you should suffer loss due to “hidden hazards” in the title. You should always request a policy of title insurance if it is available in your area.

Currently most all states offer title insurance, except the state of Iowa, which offers a “title guarantee” policy which provides almost identical coverage to that under a policy of title insurance.

Title insurance is your protection against loss if any problems, such as fraud and forgery, defective deeds, mental incompetence, confusion caused by similar or identical names, clerical errors, or “hidden defects” result in a claim against your title and ownership. Since the policy premium is a one-time fee, paid at the onset of the policy, the protection it affords could prove invaluable. Check your area for local title companies offering title insurance and compare rates. Look for a reputable company, one which has been in business for at least 8-10 years, and ask about the services they provide.

If you have an attorney handling your closing, request that the attorney obtain the title insurance coverage for you. The coverage under your policy of title insurance will last as long as you or your heirs hold title to the property.

What Is The Difference Between a Title Theory and a Lien Theory State?

Often a buyer wonders if he is buying property in a state which is considered a “title theory state” or a “lien theory” state. Why would you need to know which custom is practiced in your state?

When financing is involved in a real estate purchase, it is important to understand if you will be subject to the title or lien theory of mortgages. The way in which a state will interpret how mortgage law is followed will be determined by which type of theory is practiced in your state.

Each type of theory has special considerations on who will hold title and how foreclosure proceedings would take place if they were to become necessary. In title theory states, the borrower does not actually keep title to the property during the loan term. The seller gives the buyer/borrower a deed to the property but when the borrower signs the mortgage for the loan the borrower gives the title back to the mortgage holder. The lender then holds title to the property, as security only, until all loan payments have been made. During that time the borrower has the right to possession of the property, and the lender delivers the deed back to the borrower only after the loan obligation has been satisfied.

In a lien theory state, the buyer holds the deed to the property during the mortgage term The buyer promises to make all payments to the lender and the mortgage becomes a lien on the property, but title remains with the buyer. The lender’s lien is removed once the payment of all loan payments have been completed. Foreclosure proceedings in a lien theory state may be more difficult for the lender than in a title theory state, due to the fact that the buyer is holding title to the land and not the lender.

There is another type of mortgage custom which is referred to as the Deed of Trust theory. Under a Deed of Trust, the seller gives title to the buyer, and the buyer then signs a Deed of Trust which makes the lender the beneficiary in the Deed of Trust. A third-party trustee typically holds the title to the property in trust, with the power to foreclose on the buyer if there is a default. The buyer owns the property and has all rights of ownership and possession, subject only to the conditions in the deed of trust. When the loan has been paid off, the lender will give clear the title by way of recording a Deed of Reconveyance. The Deed of Reconveyance removes the lender’s interest in the property.

Some states have modified the title and lien theories, and these states are referred to as “intermediary theory” states. In these states, the title remains with the borrower, but the lender may take back title to the property if the borrower defaults on the loan. Be sure to check with your title officer at the time of your purchase or sale to verify the current practice in your state.

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Do I Get Title Insurance on a Condominium?

In a condominium, you technically do not own “land” but rather you own the “air space” inside the walls, ceiling and floor of your unit. Title insurance is available for a condominium, just as it is in a house on it’s own parcel of land. You should get title insurance on your condominium unit to protect your interests.

A title search will be done when you are purchasing your condominium, just as it is when buying a house, and this search will reveal any defects in the title of the unit along with any problems or liens which may occur against the condominium building or the complex itself. You will receive a deed to your own unit plus an undivided interest in the common areas, such as the parking areas, walkways, yards, and pool.

Read over the title report carefully. You would want to be sure that you could not be held liable for any unpaid bills or liens against the condominium association. If there are unpaid bills on the common areas, the association could prepare an affidavit stating that they have the money to pay the bill. If there is litigation regarding an unpaid bill, the association could post a bond or set the money aside for payment of that debt.

Check with your escrow or closing agent for the correct procedure to follow if you find something objectionable on the title report. If a lender is involved in your purchase, they will require title insurance to protect their interest in the condominium unit. Often special condominium “endorsements” are required which will be attached to the title insurance policy.

The condominium documents or “condo docs” or Covenants, Conditions and Restrictions are normally incorporated in the deed and you should read these carefully, as they set forth all the rights, duties, and obligations of all the unit owners. Your preliminary title report will show the book and page where these documents are recorded in the official country records. You can ask your escrow officer, the homeowner’s association or the recorder’s office for a copy.

It is important that you read these documents carefully. Although they are often voluminous and complex to read, they spell out the specific conditions which bind each unit owner.

TIP
Included in the condominium documents may be rules which limit the number, type, and weight of pets; how many visitors you can have at any one time; how often – and for how long – you can rent out your unit (if at all); when and how you can reserve the patio, sundeck, party room, or building barbeque grill; when you can have work done in your unit; and, what day you can close and move into your unit.

ALTA Endorsement
Form 4 (Condominium)

The Company insures the insured against loss or damage sustained by reason of:

The failure of the unit identified in Schedule A and its common elements to be part of a condominium within the meaning of the condominium statutes of the jurisdiction in which the unit and its common elements are located.
The failure of the documents required by the condominium statutes to comply with the requirements of the statutes to the extent that such failure affects the title to the unit and its common elements.
Present violations of any restrictive covenants which restrict the use of the unit and its common elements and which are contained in the condominium documents, except violations relating to environmental protection unless a notice of a violation thereof has been recorded or filed in the public records and is not excepted in Schedule B. The restrictive covenants do not contain any provisions which will cause a forfeiture or reversion of title.
The priority of any lien for charges and assessments at Date of Policy provided for in the condominium statutes and condominium documents over the lien of any insured mortgage identified in Schedule A.
The failure of the unit and its common elements to be entitled by law to be assessed for real property taxes as a separate parcel.
any obligation to remove any improvements which exist at Date Of Policy because of any present encroachments or because of any future unintentional encroachment of the common elements upon any unit or of any unit upon the common elements or another unit.
The failure of title by reason of a right of first refusal to purchase the unit and its common elements which was exercised or could have been exercised at Date of Policy.

Is Title Insurance Required by Law?

Title insurance is not required by law, however almost all lenders will require a lender’s title insurance policy as a condition of making their loan. A lender wants to protect their interest in the property and a title insurance policy is one way in which they can do this. In addition, Buyers should always insist upon an owner’s title policy to protect their equity in the property. Local custom often dictates who pays for the policy of title insurance, although this may be a negotiable item in your closing.

What Is The Lis Pendens That I Found In The Preliminary Title Report?

A lis pendens literally means that litigation is pending. It tells the public that a lawsuit affecting the property is in progress and that any judgment awarded in that legal action will have priority as of the date of the lis pendens. Some lawyers file a lis pendens automatically when they file a suit affecting title to real estate. The lis pendens creates a cloud on the title and can prevent a potential sale of the property from taking place.

A property owner’s first remedy if a lis pendens is found, is to post a bond. If the court determines that the lis pendens was filed in bad faith, or that it does not affect title or possession to the property, then the court may expunge the lis pendens without the posting of a bond. You can take title subject to the lis pendens, but you would risk possible future judgments against the property.

You will find the lis pendens in the preliminary report together with the liens and easements which may be listed. Read through the preliminary report carefully to determine which liens or items can stay on the property and which items must be paid or settled prior to closing. Once closed, the items not taken care of will remain on the property.

This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Sandy Gadow

Making Real Estate and Closing Easy

Category Archives: Title Insurance

How to Find Open Permits
on the Property You Want to Buy

These Common Title Problems Can Snag Your Home Closing

State by State Closing Guide

How Closings Are Handled State by State

How to Choose a Title Insurance Company

Is Title Insurance A Worthy Investment?

What Types of Title Insurance Are Available?

What Types of Risks Does An Owner’s Policy Cover?

What Additional Coverage Does A Lender’s Policy Include?

What Is The Cost of Title Insurance?

How Long Does Title Insurance Remain In Effect?

Can I Transfer The Title Insurance To A New Owner?

How your Title Insurance Dollar is Divided Up

Shopping On-Line for Title Insurance

What is an unrecorded easement?

Why do I need a survey?

Do I Need a New Title Policy When I Refinance My Mortgage?

Related Question

Will The Builder Pay for the Owner’s Policy of Title Insurance?

When Would I Use “Direct Deeding?”

What Is An Attorney’s Opinion Of Title?

Related Question

What Is The Difference Between a Title Theory and a Lien Theory State?

Do I Get Title Insurance on a Condominium?

Related Question

ALTA Endorsement
Form 4 (Condominium)

Is Title Insurance Required by Law?

What Is The Lis Pendens That I Found In The Preliminary Title Report?

What Types of Title Insurance Are Available?

What Types of Risks Does An Owner’s Policy Cover?

What Additional Coverage Does A Lender’s Policy Include?

What Is The Cost of Title Insurance?

How Long Does Title Insurance Remain In Effect?

Can I Transfer The Title Insurance To A New Owner?

Related Question

Related Question

Related Question

ALTA Endorsement Form 4 (Condominium)

ALTA Endorsement
Form 4 (Condominium)