What does a title company do? –
A real estate transaction generally has three important players – Title Company, Realtor, and Lender.
- The Title Company ensures the property being sold has a clear and legal title (through research & transfer of ownership at closing), provides title insurance, and prepares all documents for the closing transaction.
- The Realtor assists the Buyer with finding a property, contract negotiations, and signing.
- The Lender is the financial institution that provides the Buyer with a loan to purchase the property.
What is title insurance and is it required? –
Title insurance is a policy that protects Owner’s and Lender’s from financial losses and legal issues related to property ownership.
The Lender’s policy is generally required, whereas an Owner’s policy is optional – though strongly recommended.
Title insurance is a one-time fee at the time of closing and is about 0.5% of the purchase price.
Are there different types of title insurance policies? –
Yes. A Lender’s policy and an Owner’s policy.
A Lender’s policy protects the Lender against title defects that could affect the lien of the mortgage. This only covers the Lender’s interest in the property.
An Owner’s policy protects the Buyer against title defects that could affect ownership rights. The policy can cover attorney fees, court expenses, and pay losses caused by the defects.
What is a title search? –
A title search consists of a search of public records to find possible title defects and associated risks with the property.
An abstract (detailed history of the property) and a title exam (a report of the property & any curative actions needed) are produced by the Title Company before closing.
Any liens, judgments, or other title discrepancies found must be settled or paid before closing.
What can I expect during the closing process? –
Once you have an accepted offer for a property your information moves to the Title Company for processing. The entire closing experience can differ in length depending on title issues or Lender requirements, but generally, this process can take about 3-4 weeks.
The Title Company reviews the history of the property, identifies any title issues, and issues a commitment to insure the title to the property. The Lender then takes over to finalize financials. Once the loan is completed, or if no Lender, all parties can move to schedule the closing.
Closing is scheduled by the Title Company once title work and Lender work is completed.
What can I expect on closing day? –
Expect about 1 hour for closing – 40 minutes for the Buyer to sign & 20 minutes for the Seller to sign & discuss any additional property details.
Attendees are generally the Buyer & Seller (or all those vested in title), Realtor(s), Lender, and the Closing Notary.
Family and friends are welcome to attend for support as well.
What do I need to bring to closing? –
US-Citizen: A valid, non-expired government-issued I.D. (Driver’s License, U.S. Passport, Military ID, or state ID) and certified funds (if required)
If Non-US Citizen: A foreign passport stamped by USCIS (U.S. Citizenship and Immigration Services), IRS TIN Letter, and certified funds (if required)
NOT accepted: employee ID badge, permanent resident ID card
What are certified funds? –
A cashier’s check or bank wire.
Please note: some Lenders differ on what they will accept so remember to check with them before proceeding.
When do I receive the title to my property? –
You receive the title to your property at closing – it is your Act of Cash Sale. We record this with the Clerk of Court for their official records.
What is a Closing Disclosure (CD) v. a HUD? –
You receive a Closing Disclosure when purchasing property through a Lender. This five-page form provides all the final numbers for the real estate transaction.
You receive a HUD-1 Settlement Statement when refinancing a property or in a cash sale situation. This form also contains all final numbers but is less complex.
How does the Buyer pay the Seller for the property? –
The Buyer pays for the property through the Title Company through escrow. The funds are then disbursed at closing via check or wire to the Seller.
What is escrow? –
Escrow is a legal arrangement in which a third party (typically the Title Company) temporarily holds money until a particular condition has been met, such as the fulfillment of a Purchase Agreement.
Why does the Title Company need my social security number & marital status? –
This information legally distinguishes who you are, along with any past/present spouses who may be on the title of the property.
How can I protect myself from wire fraud? –
- Confirm all wiring instructions via a trusted company phone number (from the website or a business card).
- Ask your bank to confirm the account number and the name on the account before wiring funds.
- Know that it is highly unusual for a Title Company to change wiring instructions during a transaction. If you receive an email changing wiring instructions, do not call the number in the email signature – call a trusted company phone number.
- Call the Title Company immediately after wiring to ensure the funds were delivered.
What is a foreign transaction fee? –
A foreign transaction fee is imposed on a transaction that takes place with foreign currency. This can range from 1% to 3% of the transaction cost.
What is a tax sale? –
A tax sale is the forced sale of property by the government for unpaid taxes by the property’s owner. These properties are offered at the amount of taxes due with penalities, fees, and interest. These properties are usually host to many title issues – Buyer beware.
Why does the Seller receive a 1099 after closing? –
A 1099 form is a document sent to you by an entity (not your employer) that paid you a certain type of income during the tax year. Getting a 1099 does not necessarily mean you owe taxes on this income, but it must be reported to the IRS on your return.
When you sell a house for more than what you paid for it, you could be subject to Capital Gains Tax on the profit you make from the sale.
What is a succession? –
A succession legally transfers property ownership from the deceased to the person(s) who will own the property next. A Judgment of Possession is then granted which is a court order formally transferring title to the appropriate parties.
When closing on a succession property, you will need to have:
- A certified copy of the Judgment of Possession
- A certified copy of the Letters of Administration/Letters Testamentary
- A certified copy of the court order to sell the property (if applicable)
How long does a succession take? –
Most successions can be completed in less than a year, depending on court involvement and the nature or value of the assets of the deceased.
Small successions, successions on assets valued at $125,000 or less, can usually be completed sooner.