When is "DELETING, really Adding? And What is heck is TITLE INSURANCE? Homebuyer Tips by Aubrie Layne
Understanding the section on the sales contract that pertains to the Survey of your property is an important section. In this post I will explain why having an experienced realtor like myself.Buying a home can be the single largest financial investment a consumer will ever make. You should always insist on a new survey for an existing property.
WHAT EXACLTY IS A TITLE?
Simply stated, the title to a piece of property is the evidence that the owner is in lawful possession of that property and truly own the prop
WHAT IS TITLE INSURANCE?
Title insurance is different from other types of insurance you're fimiliar with. Title insurance protects real estate owners and lenders against any property loss or damage they might experience because
of liens, encumbrances or defects in the title to the property.
HOW DOES TITLE INSURANCE DIFFER FROM OTHER INSURANCE?
Traditional insurance gives you money in an event and assumes risk. Title Insurance eliminates risk. Insurance such as car, life, health, etc., protects against potential future events and is paid for with monthly or annual
premiums. Title insurance is paid for by a one time fee at the closing of escrow and can never be taken away.
A title insurance policy will defend you against events that occurred in the past of the real estate property and the people whom may attack the title or make a claim to it.
WHAT DOES IT COVER?
Title insurance protects against claims from defects. Defects are things such as another person claiming an ownership
interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the insurance policy.
Who pays for the Title Insurance is negotiable in a real estate transaction? Common practice is that the seller pays for this but in multiple offer situations, buyers could offer to pay for it to have a stronger offer" -Aubrie Layne
WHO NEEDS IT?
Purchasers (buyers) and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from issuance of title insurance. If your property has changed hands many times or even if the property has been in the family for generations it's important to elect for this coverage.
HOW IS A TITLE INSURANCE POLICY CREATED?
After the escrow officer or lender opens the title order, the title agent or attorney begins a title search. A Preliminary Report
is issued to the customer for review and approval. All closing documents are recorded upon escrow’s instruction. Some searches can be lengthy. Others can be very quick. The title company makes sure that your purchasing a property with no mistakes on chain of ownership that can goes as far back before Texas was even a state.
How can title companies ensure no valid claims can be made against the buyers ownership? Extensive searches of hiers, unknown heirs if any, obituaries, will decrees, IRS & Tax filings, bankruptcies, forclosures, contractors liens and so on. They also correct any misspellings or errors on the title. In my own personal situation, when we bought a brand new townhome in the Houston Heights our townhome had the Incorrect Lot number. It was actually flipped flopped with the identical townhome next door. If we wouldn't have caught this then we would have had plenty of issues down the road. This could easily happen when we home builders build multiple homes on a slice of land.
WHAT IS ESCROW?
Escrow refers to the process in which the funds of a transaction (such as the sale of a house) are held by a third party, often
the title company or an attorney in the case of real estate, pending the fulfillment of the transaction. An escrow agent is a licensed professional that can countersign insurance forms and supervises the transaction.
Bonus Section-
WHAT ARE THE TITLE INSURANCE POLICY TYPES?
The Owner’s Policy insures the new owner/home buyer, and a lender’s policy insures the priority of the lender’s security interest.
DELETING
“When is ‘deleting’
really adding?”
Why is all of this important?
In the title commitment, and ultimately the title policy, there is a general exception to
the buyer's coverage that reads any "discrepancies, conflicts, shortages in area or
boundary lines, encroachments or protrusions, or overlapping improvements.”
What does this mean for the homebuyer?
Simply stated, the buyer has no coverage for those items on their Owner’s Title
Policy.
Let’s take a look at the options...
How much does this coverage cost, and who is responsible for payment?
The fee associated with the selection of option (ii) is 5% of the policy premium, and
either the Buyer or the Seller can be indicated on the contract as the responsible
party to pay for the coverage. For example, on a $200,000 home the cost for
coverage is $71.45. Remember, the charge for coverage is a one-time fee collected at
closing and lasts for as long as the buyers or their heirs own the home.
On the TREC One to Four Family Residential Resale Contract includes a provision where homebuyers must decide whether they want the survey exception amended/deleted in thier Owners Title Policy.-
EXPLANATION- When a buyer checks option (ii) on the contract, it means that exception in the
Owner’s Title Policy will be amended, and their coverage will now extend to claims
relating to those items EXCEPT for “shortages in area.” In the state of Texas,
shortages in area are not insurable by title companies, so that item will not be
covered and will always remain as an exception. The buyer will be insured for loss,
costs, and attorney’s fees and expenses resulting from discrepancies, conflicts in
boundary lines, encroachment, protrusions, or overlapping of improvements not
shown on the approved survey and not known at the time of closing.
If the buyer selects option (i), the policy will remain as is and will not cover for loss, costs, nor attorneys fees and expenses resulting from discrepancies relating to boundary lines, encroachments, protrusions or overlapping improvements.
If you would like to read real stories about real real realestate transactions and how they were affected, read my other blog post in the related posts section
NOTE: One of the local Title companies I use for my real estate transactions is Frontier Title, Memorial Office. These ladies are essential to making our real estate transaction run smoothly and quickly. When navigating a real estate transaction you truly need a team of people you can trust. I also love that their tagline is "they work start to finish" aka 24/7 workaholics like myself!
I hope you have found this article informative. Please like it or leave me a comment in the comment section or feel free to send me an email!
If you live in Houston and have any questions about your real estate goals, please reach out to me for a complementary consultation! If you would like a printable pdf version of this information please download it HERE.
Aubrie Layne
Martha Turner Sotheby’s International Realty
Central Office
281-773-4259