The real estate industry has its own distinct language, and it’s vital to learn the terminology if you’re interested in becoming a sought-after broker, making your inaugural investment in property, or buying your first home.
Here are a few valuable insights regarding title insurance, the steps involved in closing, and other concepts you’re sure to encounter.
If you have a concern that’s not addressed here, connect with us and we’ll be happy to help with anything you need.
What’s Title Insurance & Why Is It Smart to Have?
Simply put, the title for a piece of real estate is a package of rights to own and use the property as you see fit. During the purchase process, an in-depth title search is performed by a trusted third party to ensure it’s free and has no encumbrances or defects, also referred to as a “cloud on title.”
Title insurance protects the new owner from all sorts of issues that could arise and cause financial loss and stress.
Even in this digital landscape, clerical errors can and do happen. Unknown heirs can appear and make a claim against the property and forgery and fraud are becoming more common occurrences. Why take any chances?
What Does It Cost?
It’s an amazingly affordable policy that only has one premium, which is paid at the closing table, at the time of purchase. There are several factors that affect the final total due for title services:
- Property value
- Mortgage loan amount
- Your state’s laws and regulations
- The history of the chain of title
Buyers may also want to add an inexpensive inflation rider to their title insurance policy. This will offer additional coverage if property value skyrockets and there is an ensuing claim on the title.
What Happens During Closing?
This process has many moving parts, and there are a variety of associated costs involved, in addition to the title insurance premium and various administrative fees. It can take 30 to 60 days from the time you sign the contract to receiving the keys.
Once the mortgage loan is fully approved and declared “clear to close,” the closing date is scheduled and the buyer should receive a closing disclosure packet from their lender that details the final fees. This document should always be reviewed closely before signing.
Before closing day, the buyer will have deposited earnest money into an escrow account. They will also purchase a homeowner’s or other appropriate property insurance policy and be prepared to provide proof to the lender. A day or so before closing, they will send funds to the title company at the direction of their lender, closing attorney, or title company.
The actual day of closing can seem somewhat overwhelming, especially for first-time home buyers. As long as everyone shows up with all of the necessary documentation, it should go surprisingly fast and painlessly.
Can Anything Derail the Closing?
The short answer is yes, although it doesn’t happen very often. It’s always best to be prepared for any eventuality.
Here are the most common roadblocks that can pop up when buying a piece of real estate:
- Title defects, such as unresolved liens
- An appraisal that does not reflect a sufficient value for the lender’s purposes
- Financing issues due to changes in the borrower’s qualifications
- Problems securing adequate property insurance
- Unresolved or delayed repairs per the home inspection report
- Discovered forgery or fraud
In case these hassles do occur, it’s wise to partner with a team of skilled professionals from a well-regarded title company that will always be on your side.
What’s Wire Fraud?
Threat actors and online scammers continue to get smarter and utilize the latest technology to create havoc and rip people off. Also known as real estate or mortgage fraud, there are several different types of cybercrime associated with buying and selling property, and cases are on the rise.
You can protect yourself from wire fraud by taking a few common-sense steps and using caution, especially when dealing with new agents or companies.
Always confirm wire instructions over the phone or through a secure website, and never click the link in an email or download any attachments before making sure it’s a legit email.
Familiarize yourself with your broker, your lender, and your title company. Don’t give any funds directly to the property seller — always use a trusted third-party escrow company.
How Does an HOA Affect the Property?
Anyone who’s thinking of buying real estate in a community that’s governed by a homeowner’s association should do their research and due diligence before finalizing the purchase.
These organizations control the aesthetics and activities allowed on the property, and anyone who lives there has to abide by the rules and regulations or face stiff penalties.
Some HOAs do not allow owners to rent all or part of the residence, so if you plan on leasing a unit for additional income, make sure the bylaws allow it before you sign the papers. The previous owner’s unpaid HOA dues can also create a cloud on title.
What About Encroachments, Easements, and Boundary Disputes?
The title company’s exhaustive research during the closing process includes a comprehensive survey to determine the exact property lines, in case of any encroachments, easements, or boundary disputes.
Encroachment happens when a neighbor unintentionally builds a structure or owns anything that abuts or overhangs the property line. While it might not seem like a big deal, these occurrences can make it difficult to ensure a clear title.
Easements are usually outlined in writing and include situations like utility company access or the right to drive across part of a property to reach a road.
Boundary disputes should be addressed as soon as the issue arises and solved as amicably as possible. No one wants to feud with a neighbor they consider a friend. Knowledge is power. If a disagreement occurs, a property survey and a real estate attorney can solve just about any argument.
How Do I Choose the Best Title Company?
You deserve to work with a team that has your best interests in mind and stands ready to handle any issue that arises.
There are many title companies in the marketplace, but only one is dedicated to providing you with the best customer experience from start to finish. Forming a partnership with Landtrust Title Services will ensure that you always have seasoned pros in your corner, whether you’re a first-time home buyer or an experienced investor.
Learn more about our services and resources for buyers, brokers, attorneys, and real estate professionals — connect with us today!