- What is title insurance, and why do I need it?
- Why do I need an attorney? Doesn't my
lender provide one?
- Do I need an agreement in writing in order to
purchase property?
- What is an abstract?
- What is a closing and what will I need to bring?
- What are the different ways in which I can take
title?
There are two types of title insurance --
mortgagee policies and owner's policies. Title insurance provides
protection against loss due to defects in the chain of title. Mortgagee
policies protect the lender and owner's policies protect the purchaser.
Even if you have an attorney do a thorough title search or review an abstract, there are some defects
which are impossible to discern. For example, there may be a forged
signature in the chain of title, or an estate may not have been properly
probated, perhaps neglecting to include an heir. Title insurance will provide
you with protection from these, and many other problems.
The short answer is no. The lender is only concerned that there are no
liens against the property which may have priority over the lender's mortgage.
Issues such as possession, easements and restrictions which may affect your use
of the property, and defective mechanicals are not a concern of your lender.
Additionally, many lenders use title companies rather than attorneys to close
their loans. Only attorneys may dispense legal advice and representation.
You might also take a look at our "What
Can Go Wrong Page?" for some reasons why it might be a good idea to have
your own attorney at closing.
Yes. According to an ancient English doctrine called the Statute of
Frauds, which is still followed in this country, any agreement for the sale of
real property must be in writing in order to be binding upon the parties. If
anyone tells you they remember when all it took to sell a house was a handshake,
they are very old indeed--in the neighborhood of 1,000 years old, give or take a
century. It can
be a complicated matter to ensure that your interests are protected. While
licensed real estate agents and brokers can assist in preparing real estate
purchase contracts by filling in blanks on pre-printed purchase agreements, they cannot dispense legal advice, and you are always within
your rights to request that your real estate attorney prepare the purchase
agreement, or review the document your real estate agent has prepared before
you sign it. You can even include an attorney approval provision in any
agreement you sign. If your transaction requires anything other than filling in
blanks, only an attorney can assist you with this. Be very cautious if real
estate agents attempt to prepare contracts. The good ones know that only
attorneys can do this on behalf of clients. We are also more than happy to assist you in preparing a
purchase agreement.
An abstract is a history of the chain of title to the property. An
abstractor will go the recorder of deeds for the county in which the property is
located and research all documents affecting the property or the parties who
have an interest in the property.
The abstractor will then provide a brief synopsis of all the documents, adding
to the previous information. The abstract is not the "title" to
the property. There actually is no such document. You do not need an
abstract or any other document to "prove" you own real estate. Title to the
property is determined by careful review of the documents on file in the
recorder of deeds office and by no other method. In most places, you will receive a title
insurance policy. Not as thick, not as old, but much better protection for
the buyer. In fact, the only state in the entire country in which abstracts are
still required is Iowa. But, someday.....
Closing is when you sign all the documents related to the transaction. There
can be as many as 10 or 12 people in attendance, including the closing agent,
listing real estate agent, selling real estate agent, their respective brokers,
buyer's attorney, seller's attorney, sellers, and loan officer. In our office,
we try to put the sellers and their entourage in a separate room for a number of
reasons. Since a number of matters regarding the buyers' finances will be
discussed, we do not believe that others should be able to listen in on that
information. It can be intimidating to have 10 strangers looking at you when you
have questions you want to ask. We feel it is important for the buyers to be
comfortable enough to ask any question which comes to mind. It is also difficult
for the buyers to hear the explanations given by the closing agent when there
are numerous other conversations going on in the same room. We feel it is
important for the buyers to hear and understand everything which is explained to them.
You can expect to sign between 10 and 75 documents, depending on your lender
and the complexity of the transaction. Though you have always been taught to
read everything you sign--which is still excellent advice--to read this much
material, absorb it, and understand it while there are as many as 10 other
people in the room would be difficult at best. An experienced real estate
attorney has read, absorbed, and understands all of these documents, and can
explain them to you in clear and concise language. Many of these documents have
a significant legal impact on you, and you deserve to know what you are signing.
Without the experience of a real estate attorney, most buyers hardly know where
to start. Only your real estate attorney is ethically bound to have an undivided loyalty
to you. He will not gloss over important details like prepayment penalties or
restrictions on selling the property in the interest of "getting it closed."
The same cannot be said for closing agents, title company representatives, or
employees of the lender.
As far as what to bring, check with your loan officer to be sure. Common
items required for purchasers include an insurance binder and paid receipt for
your property insurance,
current paystubs, original inspections, including a wood destroying insect
(termite) inspection, and government issued photographic identification, such as
a driver's license. It is common for closing agents to require certified funds
from the purchasers to close. You should also make appropriate arrangements with
utility companies, though this generally will not affect the closing. In some
counties, you should go to the county assessor's office after closing to sign up
for owner-occupied or homestead exemptions for your real estate taxes. This will generally
save you up to several hundred dollars per year. Ask your attorney for specific
information for your county.
The most common ways to take title are tenants in common and joint tenancy.
Some states also allow tenancy by the entirety.
Tenants in common own an undivided interest in the property. If one of the
owners dies, the survivor (or survivors) keep their interest, and the decedent's
interest goes to his or her heirs or devisees if there is a will. With joint tenancy, if one of the owners
dies, the property automatically goes to the survivor (or survivors). Tenancy by the entirety is available only in certain states, and generally only
to married co-owners for the property in which they reside. Tenants by the entirety enjoy the same benefits as
joint tenants, but they also receive an additional benefit. If one of the
owners has a judgment entered against him or her, that judgment cannot be
enforced against the property so long as the owners reside at the property and
remain married. However, there are some significant disadvantages, as well. It
is not the "one size fits all" way to hold title as some attorneys may claim. We
will take the time to determine what is best for you. Only attorneys are allowed
to discuss what is best for you or make determinations with regard to taking title to real estate.
