Frequently Asked Questions
Q: What is meant by "Title?"
A:"Title" equates to legal ownership of property. It legitimates your right to "peaceful enjoyment" of the property you own, within restrictions or limitations of use imposed by government authorities. A "Clear Title" means ownership is without blemish. A "Cloud on Title" indicates that some inconsistency exists which may blemish ownership if not corrected. A "Defect in Title" is indicative of an encumbrance or a more severe problem needing remedy. Finally, a "Failure of Title" demonstrates failure to convey ownership from one owner to the next.
Q: How does Title pass from one owner to another?
A:Legal title passes from one owner to another in one of many ways through a WILL, Inheritance, Grant, Operation Of Law, Court Decree, Descent & Distribution etc. In most cases, however, it is conveyed through a written instrument called the DEED. The person conveying ownership is called a "Grantor" while the person to whom ownership is conveyed is called the "Grantee". The Deed must be delivered by the grantor and accepted by the grantee. A Deed does not have to be dated, notarized, recorded or have any consideration to be valid. However, it must be notarized before it can be recorded in court.
Q: What is meant by "Chain of Title?"
A: Chain of title refers to the chain of ownership created by repeated buying and selling of the same property. Each time a property is sold and purchased, the new ownership is recorded in county courts for public records. Over time, a chain of ownership results from such repeated change of hands.
Q: What is Title Insurance?
A: Title insurance is an insurance policy issued by an Insurance Underwriter, guaranteeing a buyer's ownership and peaceful enjoyment against claims, liens or judgments associated with a property after the purchase is completed. Such insurance protects against losses arising from events occurring prior to the date of the policy. Unlike Real Property or Casualty Insurance where coverage starts on the day a policy is issued, title insurance being Indemnity Insurance causes coverage to stop on the day the policy is issued. Its coverage extends backward in time and guarantees that events prior to your ownership do not result in losses to you.
Q: Why Do I Need Title Insurance?
A: Title insurance is used to protect one of the largest investments that a homeowner will ever make. A lender will go to great risk to minimize its risk of losing money for the purchase of real estate. First, credit is checked as an indication of a borrower's ability to repay a loan. Second, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.
Q: How much does Title Insurance cost?
A: Probably a lot less than you think. Generally the cost of title insurance (including the search, examination and related services) is about one percent or less of the value of the property. This premium is not paid annually, but it is a one time fee usually paid at the closing.
Q: What is a Title Search, and why do I need one?
A: A title search is a detailed examination of all public records that affect a property. These records include deeds, mortgages, tax records, court records, property and name indices, and many other documents. The purpose of the search is to verify the seller's true interest in the title and right to sell the property, and to discover any claims, defects and other burdens on the property. The search protects everyone involved in the property transaction since problems with real estate are transferred with the ownership.
Q: What kinds of problems can a Title Search reveal?
A: A title search can reveal any party that might have an interest in the property, as well as a number of title defects, liens or other restrictions. For example, things like outstanding taxes, unsatisfied mortgages, and judgments against any recent owner as well as restrictions on the use of the land may require an extensive search.
Q: Are there any problems that a Title Search CANNOT reveal?
A: Yes. There are several "hidden hazards" that are impossible for a search to uncover. For instance, a previous owner may have recorded his marital status incorrectly, resulting in a possible claim by a legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise several years after the purchase of your home and can jeopardize your right to ownership.
Q: How long does Title Insurance protect the property owner?
A: Title Insurance provides protection indefinitely, for as long as the current ownership lasts. When current owners sell, however, the same cycle starts all over again, and the new owner's policy ends on the date of issue, covering them from losses arising during previous ownership.
Q: What types of Title Insurance Policies are available?
A: In general, there are two different types of Title Insurance policies available. The Owner's Title Insurance Policy which offers protection only to the owner against defects in their title to real estate. The Lender's Title Insurance Policy is meant to insure and protect only the lenders' loans against defects and losses until the mortgage is paid off. Consequently, a lender's policy does not provide coverage to the owner in the absence of the owner's policy. A new owner's policy need not be necessary when refinancing an existing property, however the lender will require the purchase of a new lender policy.
Q: What is the function of a Title Insurance Company?
A: Legal statutes provide that buying and selling of real estate must involve an independent third party to facilitate the performance of escrow, closing and settlement, and the issue of title policies. A full service title company performs the search on the property, conducts the requisite due diligence to review the Chain Of Title, identify any inconsistencies, liens, judgments, etc., issue the Commitment To Insure, manage the funding through escrow accounting, coordinate all activities between the buyer, seller, realtors, mortgage brokers, lenders etc., conduct the closing, disburse funds, issue the Title Insurance Policy to both the buyer and lender, and finally get all required documents recorded to establish your ownership.
Q: What are the costs involved in Title Insurance?
A: Title Insurance costs may be broken down to two basic types. Fixed Cost and Variable Cost.
Fixed Costs (the largest component) typically represent the Title Insurance Premium (including any applicable Endorsements) paid one time based on the purchase/sale price of the property. Additionally, they also include factors such as Document Recording Fees, Stamp Fees, Intangible Taxes, City Assessment etc. These costs are formulated and regulated by the government and remain constant across all title insurance companies.
Variable Costs (the smaller component) typically represent service charges including Search & Examination Fees, Processing & Settlement Fees, Mail/Wiring/Document Storage Handling Fees, Notary Charges etc. It is in this area where title agencies differentiate themselves. Additionally, they may also include factors such as applicable Survey Charges, Inspection and Appraisal Charges, Insurance Charges, Loan Cost etc. (all/most of these being usually performed independently and charged by outside service providers).
On some occasions, one party will bear responsibility of total cost. Generally, most costs are spread between the buyer and seller, although negotiated agreements among them dictate eventually who pays for what. Please fill and submit our Online Request For Quotation Form for detailed costs associated with your specific situation, and our staff will respond to your request within 24 Hours.
Q: Who decides on the selection of a Title Agent?
A: We recognize that whether you are a buyer or seller, you have the right to choose your title company. Where most real estate buyers and sellers once let their agents select the title insurance company for them, today's customers are highly educated and experienced in measuring the power of their investment. Some would have you believe that generally the right to choose a title company rests with the party paying for such service, or the lender, mortgage broker or real estate agents. In reality however, that right was, is, and will always remain a negotiated one. Hence our belief at Crossroads Title Agency, that since the buyer always pays for every one, the property, the realtors, the lenders, the title insurance company, the insurance underwriter et al., Buyers have as much right to exercise their choice.
Q: What is RESPA?
A: RESPA stands for “Real Estate Settlement Procedures Act”. It is the law that requires that you be given certain information when you buy a home and regulates the actions of the people involved in closing the transaction.. HUD enforces the requirements of RESPA. To learn more about your rights under RESPA click here.
Q: If the note is only in my name, why does my spouse have to sign the mortgage?
A: If the property is going to be the primary residence of the married couple, then it is necessary for your spouse to sign in acknowledgement that he/she knows that the property is being encumbered and that there is a note that needs to be paid by the borrowers' heirs. In short, someone has to keep on paying the mortgage until it is paid in full.
Q: Can I put my minor children in the title?
A: Yes, you can. However, if you decide to sell, since minors lack the capacity to enter legal agreements, a guardian must be appointed by the court of equity. The guardian could be one or both parents or a third party appointed by the court called guardian ad litem. The court gives to this guardian the authority and responsibility to look after the minor's best interests.
Q: What is Homestead?
A: The Michigan Constitution provides that any Real property, Condominium, Mobile Home etc. which serves as a permanent residence of a Michigan Citizen is entitled to homestead benefits and exemptions. In order to benefit from this provision, the owner is required to file and record a "Notice of Homestead" in the official records of local county circuit court. Homestead property is protected from:
-
Forced Sale by Creditors, and entitled to
-
Property Tax Exemptions permitted under the law.
Q: What is a 1031-Exchange?
A: Internal Revenue Tax Code Section 1031 allows taxpayers to defer income tax on capital gain realized (typically on the difference between the property's adjusted basis and the sale price) from sale of investment property ("relinquished property") which is held by the taxpayer for investment or productive use in a trade or business by reinvesting the proceeds in another property of like kind ("replacement property"). A 1031 exchange is possible only when you sell real estate held for investment purposes. It cannot be used for the sale of your personal residence. Consult IRS rules for the definition of like kind and what types of properties qualify as like kind.
In order to preserve the exchange element and prevent taxpayers from merely selling relinquished property and buying replacement property, a taxpayer's access to the sales proceeds is restricted during the exchange period by requiring a third party (qualified intermediary, trustee or escrow agent) to hold the proceeds and disperse the same for the replacement property. At closing, proceeds are transferred to the third party acting as a facilitator to hold the funds until they are used to acquire the new property. The seller is allowed up to 45 days from such sale to identify the like-kind property where sales proceeds are to be applied.
Q: What is Escrow?
A: As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.
Simply stated, the escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow.
The escrow holder must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds.
If the transaction is dependent on arranging new financing, it is the buyer's or his agent's responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. A real estate agent can help identify appropriate lending institutions.
When all instructions in the escrow have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees - such as title insurance premiums, real estate commissions, termite inspection charges - are paid. Title to the property is then transferred under the terms of the escrow instructions and appropriate title insurance is issued.
Payment of funds at the close of escrow should be in the form acceptable to the escrow, since out-of-town and personal checks can cause days of delay in processing the transaction.
The following items represent a typical list of what an escrow holder does and does not do:
The escrow holder:
-
Serves as the neutral "stakeholder" and the communications link to all parties in the transaction
-
Prepares escrow instructions
-
Requests a preliminary title search to determine the present condition of title to the property
-
Requests a beneficiary's statement if debt or obligation is to be taken over by the buyer
-
Complies with lender's requirements, specified in the escrow agreement
-
Receives purchase funds from the buyer, prepares or secures the deed or other documents related to escrow
-
Prorates taxes, interest, insurance and rents according to instructions
-
Secures releases of all contingencies or other conditions as imposed on any particular escrow
-
Records deeds and any other documents as instructed
-
Requests issuance of the title insurance policy
-
Closes escrow when all of the instructions of buyer and seller have been carried out
-
Disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs
-
Prepares final statements for the parties accounting for the disposition of all funds deposited in escrow. (These are useful in the preparation of tax returns.)
The escrow holder does not :
-
Offer legal advice
-
Negotiate the transaction
-
Offer investment advice.
Frequently Asked Questions
Q: What is meant by "Title?"
A:"Title" equates to legal ownership of property. It legitimates your right to "peaceful enjoyment" of the property you own, within restrictions or limitations of use imposed by government authorities. A "Clear Title" means ownership is without blemish. A "Cloud on Title" indicates that some inconsistency exists which may blemish ownership if not corrected. A "Defect in Title" is indicative of an encumbrance or a more severe problem needing remedy. Finally, a "Failure of Title" demonstrates failure to convey ownership from one owner to the next.
Q: How does Title pass from one owner to another?
A:Legal title passes from one owner to another in one of many ways through a WILL, Inheritance, Grant, Operation Of Law, Court Decree, Descent & Distribution etc. In most cases, however, it is conveyed through a written instrument called the DEED. The person conveying ownership is called a "Grantor" while the person to whom ownership is conveyed is called the "Grantee". The Deed must be delivered by the grantor and accepted by the grantee. A Deed does not have to be dated, notarized, recorded or have any consideration to be valid. However, it must be notarized before it can be recorded in court.
Q: What is meant by "Chain of Title?"
A: Chain of title refers to the chain of ownership created by repeated buying and selling of the same property. Each time a property is sold and purchased, the new ownership is recorded in county courts for public records. Over time, a chain of ownership results from such repeated change of hands.
Q: What is Title Insurance?
A: Title insurance is an insurance policy issued by an Insurance Underwriter, guaranteeing a buyer's ownership and peaceful enjoyment against claims, liens or judgments associated with a property after the purchase is completed. Such insurance protects against losses arising from events occurring prior to the date of the policy. Unlike Real Property or Casualty Insurance where coverage starts on the day a policy is issued, title insurance being Indemnity Insurance causes coverage to stop on the day the policy is issued. Its coverage extends backward in time and guarantees that events prior to your ownership do not result in losses to you.
Q: Why Do I Need Title Insurance?
A: Title insurance is used to protect one of the largest investments that a homeowner will ever make. A lender will go to great risk to minimize its risk of losing money for the purchase of real estate. First, credit is checked as an indication of a borrower's ability to repay a loan. Second, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.
Q: How much does Title Insurance cost?
A: Probably a lot less than you think. Generally the cost of title insurance (including the search, examination and related services) is about one percent or less of the value of the property. This premium is not paid annually, but it is a one time fee usually paid at the closing.
Q: What is a Title Search, and why do I need one?
A: A title search is a detailed examination of all public records that affect a property. These records include deeds, mortgages, tax records, court records, property and name indices, and many other documents. The purpose of the search is to verify the seller's true interest in the title and right to sell the property, and to discover any claims, defects and other burdens on the property. The search protects everyone involved in the property transaction since problems with real estate are transferred with the ownership.
Q: What kinds of problems can a Title Search reveal?
A: A title search can reveal any party that might have an interest in the property, as well as a number of title defects, liens or other restrictions. For example, things like outstanding taxes, unsatisfied mortgages, and judgments against any recent owner as well as restrictions on the use of the land may require an extensive search.
Q: Are there any problems that a Title Search CANNOT reveal?
A: Yes. There are several "hidden hazards" that are impossible for a search to uncover. For instance, a previous owner may have recorded his marital status incorrectly, resulting in a possible claim by a legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise several years after the purchase of your home and can jeopardize your right to ownership.
Q: How long does Title Insurance protect the property owner?
A: Title Insurance provides protection indefinitely, for as long as the current ownership lasts. When current owners sell, however, the same cycle starts all over again, and the new owner's policy ends on the date of issue, covering them from losses arising during previous ownership.
Q: What types of Title Insurance Policies are available?
A: In general, there are two different types of Title Insurance policies available. The Owner's Title Insurance Policy which offers protection only to the owner against defects in their title to real estate. The Lender's Title Insurance Policy is meant to insure and protect only the lenders' loans against defects and losses until the mortgage is paid off. Consequently, a lender's policy does not provide coverage to the owner in the absence of the owner's policy. A new owner's policy need not be necessary when refinancing an existing property, however the lender will require the purchase of a new lender policy.
Q: What is the function of a Title Insurance Company?
A: Legal statutes provide that buying and selling of real estate must involve an independent third party to facilitate the performance of escrow, closing and settlement, and the issue of title policies. A full service title company performs the search on the property, conducts the requisite due diligence to review the Chain Of Title, identify any inconsistencies, liens, judgments, etc., issue the Commitment To Insure, manage the funding through escrow accounting, coordinate all activities between the buyer, seller, realtors, mortgage brokers, lenders etc., conduct the closing, disburse funds, issue the Title Insurance Policy to both the buyer and lender, and finally get all required documents recorded to establish your ownership.
Q: What are the costs involved in Title Insurance?
A: Title Insurance costs may be broken down to two basic types. Fixed Cost and Variable Cost.
Fixed Costs (the largest component) typically represent the Title Insurance Premium (including any applicable Endorsements) paid one time based on the purchase/sale price of the property. Additionally, they also include factors such as Document Recording Fees, Stamp Fees, Intangible Taxes, City Assessment etc. These costs are formulated and regulated by the government and remain constant across all title insurance companies.
Variable Costs (the smaller component) typically represent service charges including Search & Examination Fees, Processing & Settlement Fees, Mail/Wiring/Document Storage Handling Fees, Notary Charges etc. It is in this area where title agencies differentiate themselves. Additionally, they may also include factors such as applicable Survey Charges, Inspection and Appraisal Charges, Insurance Charges, Loan Cost etc. (all/most of these being usually performed independently and charged by outside service providers).
On some occasions, one party will bear responsibility of total cost. Generally, most costs are spread between the buyer and seller, although negotiated agreements among them dictate eventually who pays for what. Please fill and submit our Online Request For Quotation Form for detailed costs associated with your specific situation, and our staff will respond to your request within 24 Hours.
Q: Who decides on the selection of a Title Agent?
A: We recognize that whether you are a buyer or seller, you have the right to choose your title company. Where most real estate buyers and sellers once let their agents select the title insurance company for them, today's customers are highly educated and experienced in measuring the power of their investment. Some would have you believe that generally the right to choose a title company rests with the party paying for such service, or the lender, mortgage broker or real estate agents. In reality however, that right was, is, and will always remain a negotiated one. Hence our belief at Crossroads Title Agency, that since the buyer always pays for every one, the property, the realtors, the lenders, the title insurance company, the insurance underwriter et al., Buyers have as much right to exercise their choice.
Q: What is RESPA?
A: RESPA stands for “Real Estate Settlement Procedures Act”. It is the law that requires that you be given certain information when you buy a home and regulates the actions of the people involved in closing the transaction.. HUD enforces the requirements of RESPA. To learn more about your rights under RESPA click here.
Q: If the note is only in my name, why does my spouse have to sign the mortgage?
A: If the property is going to be the primary residence of the married couple, then it is necessary for your spouse to sign in acknowledgement that he/she knows that the property is being encumbered and that there is a note that needs to be paid by the borrowers' heirs. In short, someone has to keep on paying the mortgage until it is paid in full.
Q: Can I put my minor children in the title?
A: Yes, you can. However, if you decide to sell, since minors lack the capacity to enter legal agreements, a guardian must be appointed by the court of equity. The guardian could be one or both parents or a third party appointed by the court called guardian ad litem. The court gives to this guardian the authority and responsibility to look after the minor's best interests.
Q: What is Homestead?
A: The Michigan Constitution provides that any Real property, Condominium, Mobile Home etc. which serves as a permanent residence of a Michigan Citizen is entitled to homestead benefits and exemptions. In order to benefit from this provision, the owner is required to file and record a "Notice of Homestead" in the official records of local county circuit court. Homestead property is protected from:
-
Forced Sale by Creditors, and entitled to
-
Property Tax Exemptions permitted under the law.
Q: What is a 1031-Exchange?
A: Internal Revenue Tax Code Section 1031 allows taxpayers to defer income tax on capital gain realized (typically on the difference between the property's adjusted basis and the sale price) from sale of investment property ("relinquished property") which is held by the taxpayer for investment or productive use in a trade or business by reinvesting the proceeds in another property of like kind ("replacement property"). A 1031 exchange is possible only when you sell real estate held for investment purposes. It cannot be used for the sale of your personal residence. Consult IRS rules for the definition of like kind and what types of properties qualify as like kind.
In order to preserve the exchange element and prevent taxpayers from merely selling relinquished property and buying replacement property, a taxpayer's access to the sales proceeds is restricted during the exchange period by requiring a third party (qualified intermediary, trustee or escrow agent) to hold the proceeds and disperse the same for the replacement property. At closing, proceeds are transferred to the third party acting as a facilitator to hold the funds until they are used to acquire the new property. The seller is allowed up to 45 days from such sale to identify the like-kind property where sales proceeds are to be applied.
Q: What is Escrow?
A: As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.
Simply stated, the escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow.
The escrow holder must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds.
If the transaction is dependent on arranging new financing, it is the buyer's or his agent's responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. A real estate agent can help identify appropriate lending institutions.
When all instructions in the escrow have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees - such as title insurance premiums, real estate commissions, termite inspection charges - are paid. Title to the property is then transferred under the terms of the escrow instructions and appropriate title insurance is issued.
Payment of funds at the close of escrow should be in the form acceptable to the escrow, since out-of-town and personal checks can cause days of delay in processing the transaction.
The following items represent a typical list of what an escrow holder does and does not do:
The escrow holder:
-
Serves as the neutral "stakeholder" and the communications link to all parties in the transaction
-
Prepares escrow instructions
-
Requests a preliminary title search to determine the present condition of title to the property
-
Requests a beneficiary's statement if debt or obligation is to be taken over by the buyer
-
Complies with lender's requirements, specified in the escrow agreement
-
Receives purchase funds from the buyer, prepares or secures the deed or other documents related to escrow
-
Prorates taxes, interest, insurance and rents according to instructions
-
Secures releases of all contingencies or other conditions as imposed on any particular escrow
-
Records deeds and any other documents as instructed
-
Requests issuance of the title insurance policy
-
Closes escrow when all of the instructions of buyer and seller have been carried out
-
Disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs
-
Prepares final statements for the parties accounting for the disposition of all funds deposited in escrow. (These are useful in the preparation of tax returns.)
The escrow holder does not :
-
Offer legal advice
-
Negotiate the transaction
-
Offer investment advice.
Frequently Asked Questions
Q: What is meant by "Title?"
A:"Title" equates to legal ownership of property. It legitimates your right to "peaceful enjoyment" of the property you own, within restrictions or limitations of use imposed by government authorities. A "Clear Title" means ownership is without blemish. A "Cloud on Title" indicates that some inconsistency exists which may blemish ownership if not corrected. A "Defect in Title" is indicative of an encumbrance or a more severe problem needing remedy. Finally, a "Failure of Title" demonstrates failure to convey ownership from one owner to the next.
Q: How does Title pass from one owner to another?
A:Legal title passes from one owner to another in one of many ways through a WILL, Inheritance, Grant, Operation Of Law, Court Decree, Descent & Distribution etc. In most cases, however, it is conveyed through a written instrument called the DEED. The person conveying ownership is called a "Grantor" while the person to whom ownership is conveyed is called the "Grantee". The Deed must be delivered by the grantor and accepted by the grantee. A Deed does not have to be dated, notarized, recorded or have any consideration to be valid. However, it must be notarized before it can be recorded in court.
Q: What is meant by "Chain of Title?"
A: Chain of title refers to the chain of ownership created by repeated buying and selling of the same property. Each time a property is sold and purchased, the new ownership is recorded in county courts for public records. Over time, a chain of ownership results from such repeated change of hands.
Q: What is Title Insurance?
A: Title insurance is an insurance policy issued by an Insurance Underwriter, guaranteeing a buyer's ownership and peaceful enjoyment against claims, liens or judgments associated with a property after the purchase is completed. Such insurance protects against losses arising from events occurring prior to the date of the policy. Unlike Real Property or Casualty Insurance where coverage starts on the day a policy is issued, title insurance being Indemnity Insurance causes coverage to stop on the day the policy is issued. Its coverage extends backward in time and guarantees that events prior to your ownership do not result in losses to you.
Q: Why Do I Need Title Insurance?
A: Title insurance is used to protect one of the largest investments that a homeowner will ever make. A lender will go to great risk to minimize its risk of losing money for the purchase of real estate. First, credit is checked as an indication of a borrower's ability to repay a loan. Second, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.
Q: How much does Title Insurance cost?
A: Probably a lot less than you think. Generally the cost of title insurance (including the search, examination and related services) is about one percent or less of the value of the property. This premium is not paid annually, but it is a one time fee usually paid at the closing.
Q: What is a Title Search, and why do I need one?
A: A title search is a detailed examination of all public records that affect a property. These records include deeds, mortgages, tax records, court records, property and name indices, and many other documents. The purpose of the search is to verify the seller's true interest in the title and right to sell the property, and to discover any claims, defects and other burdens on the property. The search protects everyone involved in the property transaction since problems with real estate are transferred with the ownership.
Q: What kinds of problems can a Title Search reveal?
A: A title search can reveal any party that might have an interest in the property, as well as a number of title defects, liens or other restrictions. For example, things like outstanding taxes, unsatisfied mortgages, and judgments against any recent owner as well as restrictions on the use of the land may require an extensive search.
Q: Are there any problems that a Title Search CANNOT reveal?
A: Yes. There are several "hidden hazards" that are impossible for a search to uncover. For instance, a previous owner may have recorded his marital status incorrectly, resulting in a possible claim by a legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise several years after the purchase of your home and can jeopardize your right to ownership.
Q: How long does Title Insurance protect the property owner?
A: Title Insurance provides protection indefinitely, for as long as the current ownership lasts. When current owners sell, however, the same cycle starts all over again, and the new owner's policy ends on the date of issue, covering them from losses arising during previous ownership.
Q: What types of Title Insurance Policies are available?
A: In general, there are two different types of Title Insurance policies available. The Owner's Title Insurance Policy which offers protection only to the owner against defects in their title to real estate. The Lender's Title Insurance Policy is meant to insure and protect only the lenders' loans against defects and losses until the mortgage is paid off. Consequently, a lender's policy does not provide coverage to the owner in the absence of the owner's policy. A new owner's policy need not be necessary when refinancing an existing property, however the lender will require the purchase of a new lender policy.
Q: What is the function of a Title Insurance Company?
A: Legal statutes provide that buying and selling of real estate must involve an independent third party to facilitate the performance of escrow, closing and settlement, and the issue of title policies. A full service title company performs the search on the property, conducts the requisite due diligence to review the Chain Of Title, identify any inconsistencies, liens, judgments, etc., issue the Commitment To Insure, manage the funding through escrow accounting, coordinate all activities between the buyer, seller, realtors, mortgage brokers, lenders etc., conduct the closing, disburse funds, issue the Title Insurance Policy to both the buyer and lender, and finally get all required documents recorded to establish your ownership.
Q: What are the costs involved in Title Insurance?
A: Title Insurance costs may be broken down to two basic types. Fixed Cost and Variable Cost.
Fixed Costs (the largest component) typically represent the Title Insurance Premium (including any applicable Endorsements) paid one time based on the purchase/sale price of the property. Additionally, they also include factors such as Document Recording Fees, Stamp Fees, Intangible Taxes, City Assessment etc. These costs are formulated and regulated by the government and remain constant across all title insurance companies.
Variable Costs (the smaller component) typically represent service charges including Search & Examination Fees, Processing & Settlement Fees, Mail/Wiring/Document Storage Handling Fees, Notary Charges etc. It is in this area where title agencies differentiate themselves. Additionally, they may also include factors such as applicable Survey Charges, Inspection and Appraisal Charges, Insurance Charges, Loan Cost etc. (all/most of these being usually performed independently and charged by outside service providers).
On some occasions, one party will bear responsibility of total cost. Generally, most costs are spread between the buyer and seller, although negotiated agreements among them dictate eventually who pays for what. Please fill and submit our Online Request For Quotation Form for detailed costs associated with your specific situation, and our staff will respond to your request within 24 Hours.
Q: Who decides on the selection of a Title Agent?
A: We recognize that whether you are a buyer or seller, you have the right to choose your title company. Where most real estate buyers and sellers once let their agents select the title insurance company for them, today's customers are highly educated and experienced in measuring the power of their investment. Some would have you believe that generally the right to choose a title company rests with the party paying for such service, or the lender, mortgage broker or real estate agents. In reality however, that right was, is, and will always remain a negotiated one. Hence our belief at Crossroads Title Agency, that since the buyer always pays for every one, the property, the realtors, the lenders, the title insurance company, the insurance underwriter et al., Buyers have as much right to exercise their choice.
Q: What is RESPA?
A: RESPA stands for “Real Estate Settlement Procedures Act”. It is the law that requires that you be given certain information when you buy a home and regulates the actions of the people involved in closing the transaction.. HUD enforces the requirements of RESPA. To learn more about your rights under RESPA click here.
Q: If the note is only in my name, why does my spouse have to sign the mortgage?
A: If the property is going to be the primary residence of the married couple, then it is necessary for your spouse to sign in acknowledgement that he/she knows that the property is being encumbered and that there is a note that needs to be paid by the borrowers' heirs. In short, someone has to keep on paying the mortgage until it is paid in full.
Q: Can I put my minor children in the title?
A: Yes, you can. However, if you decide to sell, since minors lack the capacity to enter legal agreements, a guardian must be appointed by the court of equity. The guardian could be one or both parents or a third party appointed by the court called guardian ad litem. The court gives to this guardian the authority and responsibility to look after the minor's best interests.
Q: What is Homestead?
A: The Michigan Constitution provides that any Real property, Condominium, Mobile Home etc. which serves as a permanent residence of a Michigan Citizen is entitled to homestead benefits and exemptions. In order to benefit from this provision, the owner is required to file and record a "Notice of Homestead" in the official records of local county circuit court. Homestead property is protected from:
-
Forced Sale by Creditors, and entitled to
-
Property Tax Exemptions permitted under the law.
Q: What is a 1031-Exchange?
A: Internal Revenue Tax Code Section 1031 allows taxpayers to defer income tax on capital gain realized (typically on the difference between the property's adjusted basis and the sale price) from sale of investment property ("relinquished property") which is held by the taxpayer for investment or productive use in a trade or business by reinvesting the proceeds in another property of like kind ("replacement property"). A 1031 exchange is possible only when you sell real estate held for investment purposes. It cannot be used for the sale of your personal residence. Consult IRS rules for the definition of like kind and what types of properties qualify as like kind.
In order to preserve the exchange element and prevent taxpayers from merely selling relinquished property and buying replacement property, a taxpayer's access to the sales proceeds is restricted during the exchange period by requiring a third party (qualified intermediary, trustee or escrow agent) to hold the proceeds and disperse the same for the replacement property. At closing, proceeds are transferred to the third party acting as a facilitator to hold the funds until they are used to acquire the new property. The seller is allowed up to 45 days from such sale to identify the like-kind property where sales proceeds are to be applied.
Q: What is Escrow?
A: As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.
Simply stated, the escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow.
The escrow holder must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds.
If the transaction is dependent on arranging new financing, it is the buyer's or his agent's responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. A real estate agent can help identify appropriate lending institutions.
When all instructions in the escrow have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees - such as title insurance premiums, real estate commissions, termite inspection charges - are paid. Title to the property is then transferred under the terms of the escrow instructions and appropriate title insurance is issued.
Payment of funds at the close of escrow should be in the form acceptable to the escrow, since out-of-town and personal checks can cause days of delay in processing the transaction.
The following items represent a typical list of what an escrow holder does and does not do:
The escrow holder:
-
Serves as the neutral "stakeholder" and the communications link to all parties in the transaction
-
Prepares escrow instructions
-
Requests a preliminary title search to determine the present condition of title to the property
-
Requests a beneficiary's statement if debt or obligation is to be taken over by the buyer
-
Complies with lender's requirements, specified in the escrow agreement
-
Receives purchase funds from the buyer, prepares or secures the deed or other documents related to escrow
-
Prorates taxes, interest, insurance and rents according to instructions
-
Secures releases of all contingencies or other conditions as imposed on any particular escrow
-
Records deeds and any other documents as instructed
-
Requests issuance of the title insurance policy
-
Closes escrow when all of the instructions of buyer and seller have been carried out
-
Disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs
-
Prepares final statements for the parties accounting for the disposition of all funds deposited in escrow. (These are useful in the preparation of tax returns.)
The escrow holder does not :
-
Offer legal advice
-
Negotiate the transaction
-
Offer investment advice.
Frequently Asked Questions
Q: What is meant by "Title?"
A:"Title" equates to legal ownership of property. It legitimates your right to "peaceful enjoyment" of the property you own, within restrictions or limitations of use imposed by government authorities. A "Clear Title" means ownership is without blemish. A "Cloud on Title" indicates that some inconsistency exists which may blemish ownership if not corrected. A "Defect in Title" is indicative of an encumbrance or a more severe problem needing remedy. Finally, a "Failure of Title" demonstrates failure to convey ownership from one owner to the next.
Q: How does Title pass from one owner to another?
A:Legal title passes from one owner to another in one of many ways through a WILL, Inheritance, Grant, Operation Of Law, Court Decree, Descent & Distribution etc. In most cases, however, it is conveyed through a written instrument called the DEED. The person conveying ownership is called a "Grantor" while the person to whom ownership is conveyed is called the "Grantee". The Deed must be delivered by the grantor and accepted by the grantee. A Deed does not have to be dated, notarized, recorded or have any consideration to be valid. However, it must be notarized before it can be recorded in court.
Q: What is meant by "Chain of Title?"
A: Chain of title refers to the chain of ownership created by repeated buying and selling of the same property. Each time a property is sold and purchased, the new ownership is recorded in county courts for public records. Over time, a chain of ownership results from such repeated change of hands.
Q: What is Title Insurance?
A: Title insurance is an insurance policy issued by an Insurance Underwriter, guaranteeing a buyer's ownership and peaceful enjoyment against claims, liens or judgments associated with a property after the purchase is completed. Such insurance protects against losses arising from events occurring prior to the date of the policy. Unlike Real Property or Casualty Insurance where coverage starts on the day a policy is issued, title insurance being Indemnity Insurance causes coverage to stop on the day the policy is issued. Its coverage extends backward in time and guarantees that events prior to your ownership do not result in losses to you.
Q: Why Do I Need Title Insurance?
A: Title insurance is used to protect one of the largest investments that a homeowner will ever make. A lender will go to great risk to minimize its risk of losing money for the purchase of real estate. First, credit is checked as an indication of a borrower's ability to repay a loan. Second, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.
Q: How much does Title Insurance cost?
A: Probably a lot less than you think. Generally the cost of title insurance (including the search, examination and related services) is about one percent or less of the value of the property. This premium is not paid annually, but it is a one time fee usually paid at the closing.
Q: What is a Title Search, and why do I need one?
A: A title search is a detailed examination of all public records that affect a property. These records include deeds, mortgages, tax records, court records, property and name indices, and many other documents. The purpose of the search is to verify the seller's true interest in the title and right to sell the property, and to discover any claims, defects and other burdens on the property. The search protects everyone involved in the property transaction since problems with real estate are transferred with the ownership.
Q: What kinds of problems can a Title Search reveal?
A: A title search can reveal any party that might have an interest in the property, as well as a number of title defects, liens or other restrictions. For example, things like outstanding taxes, unsatisfied mortgages, and judgments against any recent owner as well as restrictions on the use of the land may require an extensive search.
Q: Are there any problems that a Title Search CANNOT reveal?
A: Yes. There are several "hidden hazards" that are impossible for a search to uncover. For instance, a previous owner may have recorded his marital status incorrectly, resulting in a possible claim by a legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise several years after the purchase of your home and can jeopardize your right to ownership.
Q: How long does Title Insurance protect the property owner?
A: Title Insurance provides protection indefinitely, for as long as the current ownership lasts. When current owners sell, however, the same cycle starts all over again, and the new owner's policy ends on the date of issue, covering them from losses arising during previous ownership.
Q: What types of Title Insurance Policies are available?
A: In general, there are two different types of Title Insurance policies available. The Owner's Title Insurance Policy which offers protection only to the owner against defects in their title to real estate. The Lender's Title Insurance Policy is meant to insure and protect only the lenders' loans against defects and losses until the mortgage is paid off. Consequently, a lender's policy does not provide coverage to the owner in the absence of the owner's policy. A new owner's policy need not be necessary when refinancing an existing property, however the lender will require the purchase of a new lender policy.
Q: What is the function of a Title Insurance Company?
A: Legal statutes provide that buying and selling of real estate must involve an independent third party to facilitate the performance of escrow, closing and settlement, and the issue of title policies. A full service title company performs the search on the property, conducts the requisite due diligence to review the Chain Of Title, identify any inconsistencies, liens, judgments, etc., issue the Commitment To Insure, manage the funding through escrow accounting, coordinate all activities between the buyer, seller, realtors, mortgage brokers, lenders etc., conduct the closing, disburse funds, issue the Title Insurance Policy to both the buyer and lender, and finally get all required documents recorded to establish your ownership.
Q: What are the costs involved in Title Insurance?
A: Title Insurance costs may be broken down to two basic types. Fixed Cost and Variable Cost.
Fixed Costs (the largest component) typically represent the Title Insurance Premium (including any applicable Endorsements) paid one time based on the purchase/sale price of the property. Additionally, they also include factors such as Document Recording Fees, Stamp Fees, Intangible Taxes, City Assessment etc. These costs are formulated and regulated by the government and remain constant across all title insurance companies.
Variable Costs (the smaller component) typically represent service charges including Search & Examination Fees, Processing & Settlement Fees, Mail/Wiring/Document Storage Handling Fees, Notary Charges etc. It is in this area where title agencies differentiate themselves. Additionally, they may also include factors such as applicable Survey Charges, Inspection and Appraisal Charges, Insurance Charges, Loan Cost etc. (all/most of these being usually performed independently and charged by outside service providers).
On some occasions, one party will bear responsibility of total cost. Generally, most costs are spread between the buyer and seller, although negotiated agreements among them dictate eventually who pays for what. Please fill and submit our Online Request For Quotation Form for detailed costs associated with your specific situation, and our staff will respond to your request within 24 Hours.
Q: Who decides on the selection of a Title Agent?
A: We recognize that whether you are a buyer or seller, you have the right to choose your title company. Where most real estate buyers and sellers once let their agents select the title insurance company for them, today's customers are highly educated and experienced in measuring the power of their investment. Some would have you believe that generally the right to choose a title company rests with the party paying for such service, or the lender, mortgage broker or real estate agents. In reality however, that right was, is, and will always remain a negotiated one. Hence our belief at Crossroads Title Agency, that since the buyer always pays for every one, the property, the realtors, the lenders, the title insurance company, the insurance underwriter et al., Buyers have as much right to exercise their choice.
Q: What is RESPA?
A: RESPA stands for “Real Estate Settlement Procedures Act”. It is the law that requires that you be given certain information when you buy a home and regulates the actions of the people involved in closing the transaction.. HUD enforces the requirements of RESPA. To learn more about your rights under RESPA click here.
Q: If the note is only in my name, why does my spouse have to sign the mortgage?
A: If the property is going to be the primary residence of the married couple, then it is necessary for your spouse to sign in acknowledgement that he/she knows that the property is being encumbered and that there is a note that needs to be paid by the borrowers' heirs. In short, someone has to keep on paying the mortgage until it is paid in full.
Q: Can I put my minor children in the title?
A: Yes, you can. However, if you decide to sell, since minors lack the capacity to enter legal agreements, a guardian must be appointed by the court of equity. The guardian could be one or both parents or a third party appointed by the court called guardian ad litem. The court gives to this guardian the authority and responsibility to look after the minor's best interests.
Q: What is Homestead?
A: The Michigan Constitution provides that any Real property, Condominium, Mobile Home etc. which serves as a permanent residence of a Michigan Citizen is entitled to homestead benefits and exemptions. In order to benefit from this provision, the owner is required to file and record a "Notice of Homestead" in the official records of local county circuit court. Homestead property is protected from:
-
Forced Sale by Creditors, and entitled to
-
Property Tax Exemptions permitted under the law.
Q: What is a 1031-Exchange?
A: Internal Revenue Tax Code Section 1031 allows taxpayers to defer income tax on capital gain realized (typically on the difference between the property's adjusted basis and the sale price) from sale of investment property ("relinquished property") which is held by the taxpayer for investment or productive use in a trade or business by reinvesting the proceeds in another property of like kind ("replacement property"). A 1031 exchange is possible only when you sell real estate held for investment purposes. It cannot be used for the sale of your personal residence. Consult IRS rules for the definition of like kind and what types of properties qualify as like kind.
In order to preserve the exchange element and prevent taxpayers from merely selling relinquished property and buying replacement property, a taxpayer's access to the sales proceeds is restricted during the exchange period by requiring a third party (qualified intermediary, trustee or escrow agent) to hold the proceeds and disperse the same for the replacement property. At closing, proceeds are transferred to the third party acting as a facilitator to hold the funds until they are used to acquire the new property. The seller is allowed up to 45 days from such sale to identify the like-kind property where sales proceeds are to be applied.
Q: What is Escrow?
A: As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.
Simply stated, the escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow.
The escrow holder must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds.
If the transaction is dependent on arranging new financing, it is the buyer's or his agent's responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. A real estate agent can help identify appropriate lending institutions.
When all instructions in the escrow have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees - such as title insurance premiums, real estate commissions, termite inspection charges - are paid. Title to the property is then transferred under the terms of the escrow instructions and appropriate title insurance is issued.
Payment of funds at the close of escrow should be in the form acceptable to the escrow, since out-of-town and personal checks can cause days of delay in processing the transaction.
The following items represent a typical list of what an escrow holder does and does not do:
The escrow holder:
-
Serves as the neutral "stakeholder" and the communications link to all parties in the transaction
-
Prepares escrow instructions
-
Requests a preliminary title search to determine the present condition of title to the property
-
Requests a beneficiary's statement if debt or obligation is to be taken over by the buyer
-
Complies with lender's requirements, specified in the escrow agreement
-
Receives purchase funds from the buyer, prepares or secures the deed or other documents related to escrow
-
Prorates taxes, interest, insurance and rents according to instructions
-
Secures releases of all contingencies or other conditions as imposed on any particular escrow
-
Records deeds and any other documents as instructed
-
Requests issuance of the title insurance policy
-
Closes escrow when all of the instructions of buyer and seller have been carried out
-
Disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs
-
Prepares final statements for the parties accounting for the disposition of all funds deposited in escrow. (These are useful in the preparation of tax returns.)
The escrow holder does not :
-
Offer legal advice
-
Negotiate the transaction
-
Offer investment advice.
Petoskey Office
325 East Lake St.
Suite L4
Petoskey, MI 49770
Tel: 231.881.9080
Fax: 989.249.8090
Closings and Orders: petoskey@CrossroadsTitle.com