Real estate properties always have a title, which gives ownership of the property to the person who legally has the document.
It is important for buyers to ensure that the title of the home that they want to purchase is clean or clear: no liens for unpaid property taxes, no legal disputes on ownership by the previous owner’s family, and no encroachment in state power lines or cellular phone towers. Lenders also require the title to be clean before approving your loan application, and they want the transaction to be legitimate, with the seller legally owning the home and having the right to sell it.
When you decide to buy a home, the title is one of the primary documents that you need to be concerned about. There are a lot of processes involving the title that any property buyer should be aware of. Here are some of the most basic steps that you need to know and understand:
Normally, all property titles are stored in public records. Conducting a title search allows the buyer to examine records about the property, including historical data, wills, trusts, and deeds. Through the title search, you should be able to check if the home has pending payments for liens or mortgages, or if it is still immersed in legal disputes. This process eliminates any unwelcome surprise that may come up in the sale of a property.
Despite the seemingly fool-proof technique of a title search, it’s still possible to encounter some title-related problems that may jeopardize your ownership of the home. There have been cases where ownership of the home was not defined properly, and as a result, the buyer has no choice but to give up the home.
This is where the importance of title insurance comes in. This special kind of insurance policy protects the buyer from problems with the title of the home being purchased. This frees the buyer from any legal or financial issues stemming from ownership claims to the property. Having a title insurance in the midst of an ownership dispute should give you peace of mind, because you will receive payment for damages in case the issue leads to loss of home ownership on your part.
You may take out a policy through a title insurance company, a title agent, or attorney (in some locations). A title insurance policy is usually a one-time payment given up front, and its cost will be based on the home purchase price and the extent of the policy.
In cases of ownership disputes, the title insurance company will pay you for damages brought about by a contract loophole, which usually comes in the form of an overlooked document or legal issue during title search. Just make sure that you have the title insurance policy during the closing.
When you decide to buy a title insurance policy, study the ins and outs of the policy, including its coverage and exclusions. Bottom line, you should be able to recoup the entire sales price when the deal falls through. You may also opt to be paid by the appraised value of the property, but you need to pay additional for something called an inflation rider.
A title insurance policy may also be required by the lending institution to protect it from similar problems. The amount of the lender’s insurance policy should be equal to the mortgage. Most lenders won’t grant you a loan if you’re not willing to pay for their title insurance. Try to talk to the seller if he / she is willing to pay for your title insurance policy, while you will pay for the lender’s policy.
Title insurance can only be bought for the purpose of closing a real estate transaction. In other words, the policies for both buyer and lender will only be valid at the date of closing.
To sum it all up, there are three title-related documents that you need to secure upon closing: a clear title, a buyer’s title insurance policy, and a lender’s title insurance policy.
If you need more information about title insurance, its coverage, and opportunities to save on policy expenses with the help of the U.S. Department of Housing and Urban Development, you may visit the Federal Citizen Information Center website.
During the closing ceremony, the closing agent will ask the buyer about how the latter will prefer to take title to the property. There are three methods of taking title:
- Sole owner: This type of ownership involves an unmarried person, wherein he / she has single and complete ownership of the property. In this case, the title will be assigned to the individual person’s name.
- Joint tenancy: This situation involves a home purchase of two individuals – married or not – who have joint ownership of the house. When one of the spouses or partners dies, the surviving person will have full ownership of the property, and will be given tax credits.
- Tenants-in-common: Two or more persons who jointly share a common home may fall under this category of property ownership. Shares between the partners may not be equally distributed, and each person has the right to sell his / her shares independent of the others.
Before you step in the closing table, make sure to determine how you prefer to take title to the house. It’s probably best to seek the services of a professional – real estate attorney, estate planner, or accountant. This way, you can get more information about the pros and cons of the three methods of taking title, in order to help you arrive at a sound decision.
Remember that apart from this concern, you also have many other issues to address before the actual closing.
Recording the Deed
Although having the property title signifies that you are the owner, a written document must declare that the ownership has been transferred from the previous owner (seller) to you (buyer). This document is called the deed, and it must be recorded at the county office where the property is registered. Once the deed is recorded, you become the legal and rightful owner of the house.
After both buyer and seller affix their signatures on all required documents at the closing date, the title company will present the deed together with other requirements to the county office for the recording, and will pay a corresponding fee. Most title companies transact with the county office early in the morning or near the end of office hours. The county office will then assign a tracking number to each document as it gets recorded, along with the exact date and time of recording. Once this is completed, the public record will now have your real estate transaction on official file.
When do I get the keys to the house?
Don’t let the excitement of the closing and the home purchase get to you too much. Right after the closing or deed recording, ask your real estate agent when you will be able to get your hands on the house keys. In some closing cases, you and the seller sign the documents in one meeting location, after which you can get the keys. However, some cases involve the seller signing documents after you, leaving some delay in turning over the keys to your possession. Usually, the purchase and sales contract will explicitly state when and how you will get full possession of and access to the house.
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