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You've decided to purchase a home and hope to take possession as soon as possible. The terms have been agreed upon and all the financial arrangements have been made. But there's one important detail remaining. Before the transaction can close, a title search must be made.
The most accurate description of title is a bundle of rights in real property. A title search is the process of determining from the public record just what these rights are and who owns them. A title search is a means of determining that the person who is selling the property really has the right to sell it, and that the buyer is getting all the rights to the property (title) that he or she is paying for.
The search process can be undertaken by the title company in those jurisdictions where the company maintains offices. In some areas, however, searches are made only by practicing attorneys. However the search is performed, in most real estate transactions today a title insurance policy is purchased to assure the buyer that he or she has purchased a valid title.
In those transactions where title insurance is involved, the title company must determine insurability of the title as part of the search process. This leads to the issuance of a title policy, which insures the existence or non-existence of rights to the property.
The title insurance company will, at its own expense, defend the title and will pay losses within the coverage of the policy if they occur.
But what exactly, is involved in a title search?
This is simply a history of the ownership of a particular piece of property, telling who bought it and sold it, and when. The information may be derived from public records - usually a County Clerk's or Recorder's Office - or obtained from title plants privately owned and maintained by title companies. There are great varieties of such plants - index cards, punch cards, tract books, even sophisticated computerized plants. However, they all contain essentially the same information from which the history of the title may be secured.
This is a search to determine the present status of general real estate taxes against the property. The tax search will reveal if taxes are current or whether any taxes are past due and unpaid from previous years. In addition, the tax search will indicate the existence of any special assessments against the land and, if so, whether or not these assessments are current or past due.
A due and unpaid tax or special assessment is a prior lien or claim on the property above all others. If a buyer purchases property with unpaid and past due taxes or assessments against it, he or she is likely to find a government body - the village, county or state - placing the property up for sale to pay those taxes or assessments. A tax search reveals the status of the taxes. Title insurance protects the buyer against loss from unpaid and past due taxes and assessments.
In many places where it operates, Chicago Title sends inspectors to look at the property to verify the lot size, check the location of improvements, look for evidence of easements that are not shown in record and check on who is living there.
The purpose of this is to supplement the information learned from the title search. In the eyes of the law, any buyer of real estate is assumed to have notice of all matters properly shown in the public records as to that real estate as well as any information that an actual inspection may reveal.
If the inspector detects an unrecorded easement or other evidence of outstanding rights that could affect the owner's title and possibly the value and intended use, the company tells the buyer of these things before he or she closes the purchase. Those matters must then either be disposed of or shown as exceptions in the title insurance policy. Sometimes when an acceptable survey and appropriate affidavits are received, an inspection will not be made.
One of the most important parts of the title search is to determine if there are any unsatisfied judgments against the seller or previous owners which were in existence while they owned the title. A judgment is a general lien against the debtor's real estate and constitutes security for any money owed under the judgment. The real estate can be sold to satisfy the judgment.
It is extremely important to be sure that a title is not subject to judgments against the seller or previous owners. Title insurance provides this protection. A judgment against a person named Smith may affect the title of a seller named Smith, depending on whether or not they are the same person. So all possible variations of the name must be examined.
For example, the name Smith might be spelled Schmidt, Schmid, Schmidtt, Schmidz, Schmied, Schmiedt, Smid, Smythe, and so on. The name Nichols can be spelled 73 different ways, from Nachols to Nychals. The task is to determine which of these applies to the owner in question. First names have to be checked, too. There are 25 foreign forms of John, including Johann, Jehan, Hans, Shaun, Gudi, and Efom.
Rights established by judgment decrees, unpaid federal income taxes, and mechanic's liens all may be prior claims on the property, ahead of the buyer's or lender's rights. If a judgment is discovered that constitutes a defect in the title, it is pointed out, and the seller must then eliminate it before the title of the new buyer can be insured free and clear of that judgment.
When these searches have been completed, the title company issues a commitment to insure, stating the conditions under which it will insure the title. The buyer and seller and the mortgage lender can proceed with the closing of the transaction after clearing up any defects in the title which may have been uncovered by the search and examination.
The mortgage lender is as concerned as the buyer about the quality of the title because the property is to be security for the new mortgage loan. The mortgage lender requires assurance that it has a valid first (or another acceptable priority) mortgage lien on the property. This is not only common sense, generally is a legal requirement of regulated mortgage lenders.
The lender's title insurance, however, doesn't protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the lender are very different. The provisions of a lender's title insurance policy are very different from those of a buyer's policy, so the buyer should obtain his own policy, often issued simultaneously with the lender's policy.
Most home sellers and buyers have been informed that obtaining title insurance will provide them necessary protection over possible title defects, but many remain uncertain about why this is so - or even about what title insurance is. At Chicago Title, we believe we have everything to gain by throwing some light on the subject. The more you know about title insurance and its pricing, the more confident you'll be about coming to us for a policy.
A title insurance policy from Chicago Title is much more cost-effective than the other kinds of insurance you have had to purchase. For a single, one-time-only fee, we provide a title policy that remains effective until the property is sold to a new owner - even if that doesn't occur for decades. The Chicago Title price structure is among the lowest - giving you the most respected name in title insurance at highly competitive rates.
Any prospective buyer will need evidence that his investment in your property is free of title defects. In fact, your contract of sale probably requires it. The title insurance policy that you provide the buyer is a guarantee that you are selling a clear title to your real estate, unencumbered by any legal attachments that might limit or jeopardize ownership. The Chicago Title name carries special authority: it reassures your buyer that the title has passed the most careful scrutiny. In addition, it can help your deal close more quickly and easily.
Without a title insurance policy, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records or mistakes in examination of the title of your new property. As a result, you may be held fully accountable for any prior liens, judgments or claims brought against your new property. However, your policy insures that if such an occasion arises, you will be defended free of charge against all covered claims and paid up to the amount of the policy to settle valid claims. With a title insurance policy from Chicago Title, backed by our vast resources and financial strength, you need never worry that your new property's history will tarnish your bright future.
At Chicago Title, we're proud of our prestigious reputation. Since issuing our first title policy in 1888, we've been the industry leader, providing thousands of title policies each day. What's more, we now offer rates that are often several hundred dollars lower than our competitors. Our rates and service make us the first choice among informed home sellers, while our reputation for quality and unsurpassed financial strength makes us the first choice among informed home buyers. Even though we protect the titles of millions of American homes, we stand behind each one as if it were our own.
Today's lower interest rates have spurred you to refinance your mortgage. Now you can expect to reap the benefits of substantially reduced monthly mortgage payments, but you can also expect to pay the lender the typical closing costs associated with any mortgage loan.
Why? Because from the lender's standpoint, a refinanced loan is no different than any other mortgage loan. So be prepared for service fees or points and other expenses - including a new charge for title insurance.
Why do you need to buy title insurance again even though you purchased a policy when you first bought your home and there is no change in ownership? It's because a separate policy is needed by the lender insuring the validity of your mortgage when it is made.
For as long as you own the property your mortgage is valid, but it doesn't insure the new mortgage created when you refinance, and it doesn't provide protection against events that may have transpired between the time you purchased the property and when it is refinanced.
For example, you may have taken out a second mortgage on the home that could threaten the priority of the new lender's mortgage. Or, there could be legal judgments against you or a mechanic's lien against the property by a supplier who wasn't paid for home improvements.
Lenders also insist on a new title policy because many mortgages are packaged as securities and sold to investors in the secondary mortgage market. Title insurance is the only practical way to provide the assurance investors demand and to ensure that the mortgages backing these securities are valid and enforceable.
For your refinance transaction with the Chicago Title, you may qualify for a special title insurance rate based on the loan amount. There may be additional charges for recording fees, closing fees and endorsements. Your lender can provide you with an estimate of these costs.
Once you have made the decision to refinance your home, you'll want your transaction to progress as smoothly and efficiently as possible. In an effort to avoid potential problems and delays, consider the following points. Check with your real estate agent to determine which ones apply to you.
An escrow is an arrangement in which a disinterested third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer's and seller's instructions. People buying and selling real estate often open an escrow for their protection and convenience. The buyer can instruct the escrow holder to disburse the purchase price only upon the satisfaction of certain prerequisites and conditions. The seller can instruct the escrow holder to retain possession of the deed to the buyer until the seller's requirements, including receipt of the purchase price, are met. Both rely on the escrow holder to carry out faithfully their mutually consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out. An escrow is convenient for the buyer and seller because both can move forward separately but simultaneously in providing inspections, reports, loan commitments and funds, deeds, and many other items, using the escrow holder as the central depositing point. If the instructions from all parties to an escrow are clearly drafted, fully detailed and mutually consistent, the escrow holder can take many actions on their behalf without further consultation. This saves much time and facilitates the closing of the transaction.
The escrow holder may be any disinterested third party (although some states require that certain escrow holders be licensed). There are two important reasons for selecting an established, independent escrow firm, an attorney, or an escrow officer with a bank, S&L or title insurance company. One is that real estate transactions require a tremendous amount of technical experience and knowledge to proceed smoothly. The other is that the escrow holder will generally be responsible for safeguarding and properly distributing the purchase price. Escrow officers with established firms generally are experienced and trained in real estate procedures, title insurance, taxes, deeds and insurance.
An escrow officer must remain completely impartial throughout the entire escrow process. He or she will normally adopt a courteous but rather formal manner when dealing with parties to the escrow, keeping conversation to the matters at hand in the escrow. This formal behavior is meant for the benefit of all concerned, since the escrow officer must follow the instructions of both parties without bias.
Escrow instructions are written documents, signed by the parties giving them, which direct the escrow officer in the specific steps to be completed so the escrow can be closed.
Since the escrow holder can only follow the instructions as stated, and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.
Once all the terms and conditions of the instructions of both parties have been fulfilled, and all closing conditions satisfied, the escrow is closed and the safe and accurate transfer of property and money has been accomplished.
The method of dividing the charges for the services performed through escrow or as a result of escrow varies from place to place. The fees and service charges to be divided might include, for example, the title insurance policy premium, escrow fee, any transfer taxes, recording fees and cost in connection with any loan being obtained. Unless there is some special agreement between the buyer and seller as to how these charges are to be paid, local custom will generally be followed in drafting the instructions to the escrow holder as to how they are to be divided.
The escrow process was developed to help facilitate the sale or purchase of your home. The escrow holder accomplishes this by:
The examples and explanations described here are designed to acquaint you with the escrow process and are based on relatively simple escrows. Every escrow is unique and most are more complex than explained here. If you have questions about the escrow process, we suggest you contact an escrow officer or attorney to obtain detailed advice and further explanation.
You hear this expression more and more as condominium ownership now covers almost every form of residential housing. Townhomes, duplexes, single-family detached homes and apartment buildings. The principles of condominium ownership apply equally to all.
When you buy a condominium unit, you acquire individual and absolute title to the particular space which your unit occupies. In addition, you own an undivided interest - collectively with all other unit owners in the condominium - in all of the "common" parts of the property, such as the land, main walls, roofs, halls, lobbies, stairways and other parts of the condominium property used jointly by all owners.
Your ownership of your unit is as complete and absolute as ownership of a house and lot. You have title to your unit just as you would have title to a single-family home - with the same legal status and financial advantages that are held by the single-family home owner.
Think of the matter as having title to a cube of space. You are purchasing - acquiring title to - a unit "air lot," in just the same manner as you can acquire title to a piece of land on the earth's surface.
The principle of such "air rights" has long been established by law and there have been numerous commercial buildings erected on air rights over railroad tracks or other property.
A condominium is simply a variation of the process whereby each of a number of persons owns a "unit air lot" and they all own, in common, the land and remaining portions of the property.
It not only can, but should be reinsured in exactly the same way that the Chicago Title insures title for owners of all other types of property.
Each purchaser of real estate wants to be certain of a good title - a title that is free and clear of any cloud, defect or claim that might possibly affect ownership, cost money at some future time or make it more difficult to dispose of the property when one wishes to do so.
The same considerations prevail concerning the title to your condominium unit. As the owner of a condominium unit, you are in the same situation as any other property owner.
Title insurance policies are an accepted form of protection for buyers of real estate, providing assurance that the buyer is receiving good title. Such a policy insures the rights of an owner, and makes certain that the owner will be able to convey good title when the time comes to sell.
Chicago Title works closely with the developers of condominiums and their legal counsel to resolve problems and set up the procedures necessary to make the safeguards of title insurance available to those entering into this form of real estate ownership.
A fundamental problem is that of precisely and accurately describing the location of each individual unit in space; that is to say, establishing the physical boundaries of the unit with the same type of legal description that exactly locates a piece of land and identifies it from all other pieces of land anywhere else on the face of the earth.
Your individual unit must be described by dividing, measuring and locating it, in three-dimensional terms, so that it cannot possibly be confused with any other unit space, if you are to have good title. Only by doing so does it become possible for a condominium purchaser to be safe from involvement in the interests or obligations of owners of other units in the condominium and to acquire such an interest in your own property as will permit you to obtain a mortgage on it, and at a later time dispose of the unit through sale or by your will.
Your title insurance policy insures - guarantees to you - that your condominium declaration and the deed to your particular apartment, do, in fact, thus describe, locate and identify your unit to the exclusion of all other space on earth.
Your attorney will explain to you that the title to your unit - and the safety of all you have invested in it - are dependent upon the soundness of the title to the parcel (or parcels) of land on which your condominium dwelling has been erected.
You and other co-owners are the most recent parties in a continuous "chain of title" going back through all the owners, mortgage lenders and other parties who have ever had some interest or rights in the land on which your condominium home stands.
Just as when a single-family house and lot is bought, the title to the dwelling which you are buying is only as good as the weakest link in that chain. Somewhere down through the years during which this land stood vacant, or while it had other structures on it, there could have been a forgery, irregularities in a deed or unsatisfied judgments against previous owners. And you've heard of missing heirs, or persons declared legally dead, turning up at long last to claim their rightful share in property - with dire consequences to those who may have subsequently purchased it.
These are called "hidden risks" when real estate is purchased. There are others, and most of them cannot be discovered by an examination of the public records. You have no practical ways of learning about these possible hidden risks or weaknesses in the title to the land beneath your condominium home - and hence, weaknesses in the title to your unit. Laws that govern ownership of all real estate may protect such unsatisfied claims even if they are generations old.
These are some of the reasons why the developers of your condominium dwelling may have arranged for each unit buyer to have the protection of a title insurance policy from Chicago Title.
It is the best assurance you can have that you are receiving good title. It is exactly the same kind of title protection used in the sale and financing of many real estate developments - from small cottages to multi-million dollar commercial and industrial complexes.
Should a claim ever arise against your title as insured, Chicago Title will immediately arrange for legal counsel to defend your title, in court if necessary, completely at its own expense. Should the claim be valid and a loss sustained, it is paid by the Chicago Title up to the full value of the policy.
When you are showing your home to prospective buyers, first impressions are the most lasting and the most important to its sale.
Your major role as a seller will be to make your home as attractive as possible to potential buyers. The time, effort and limited financial investment involved can give you the competitive edge needed to sell your home when you want - at the price you want.
Since the exterior of your home is the first thing a prospective buyers sees, a little time and effort can make a big difference in the impression your home creates - and pay big dividends when the sale is made.
If you would have planned to paint the house within the coming year, consider painting the house before showing it. A new paint job, well done, will normally enhance the sale value a good deal more than the cost of the paint.
Remember, if your home's exterior looks clean, orderly and in good repair, that's the impression your house will first convey.
Interior dirt and clutter can obscure your home's good points, so start with a full housecleaning from top to bottom. Store unused or unnecessary items in closets and storage areas or hold a garage sale. Eliminate clutter and your home will look more spacious - an important selling point.
Take an inspection tour of your home, observing it as a potential buyer would, and use the following checklist to make sure it's ready to show:
Consider painting walls and replacing carpeting if cleaning doesn't do the trick.
It is also important to keep lighting in mind when you show your home. Good lighting will make your home seem more cheery and spacious.
Don't plan major improvements on your home. Most home-buyers want to make their own major changes. You are usually wiser to sell them the potential - at a price they can afford.
Showing your home is all important to its sale, and there are many ways you can help your real estate professional do his or her job successfully.
Here are some last-minute details that will maximize your home's selling potential:
Remember, your real estate broker or agent has the experience and training necessary to bring negotiations to a successful conclusion. And, if you've followed the guidelines provided, you'll know you've already done your part in helping your home sell by making sure it creates a good first impression.
The following is an outline of some of the responsibilities for each party on most escrow transactions. The process can be lengthy with many tasks required by each party to the transaction. This is to give you the basics of what is necessary for the purchase/sale process.
For your convenience we offer digital title and escrow documents available for downloading to your computer. These documents are in pdf format, viewable, and printable on Unix, Macintosh, and Windows platform with the proper Acrobat reader. The Acrobat Reader is free, download the appropriate reader if it is not currently installed on your system.
At this time the documents available are for Washington State Only.
READ THIS FIRST!! THESE DOCUMENTS HAVE BEEN DESIGNED AND FORMATTED WITHIN THE GUIDELINES SET FORTH BY THE RECORDERS OFFICE FOR RECORDING. MANIPULATION OF THESE DOCUMENTS OR SHRINKING A DOCUMENT DESIGNED FOR LEGAL PAPER TO FIT ON 8.5 x 11 MAY CAUSE THE DOCUMENT TO FAIL RECORDING GUIDELINES AT THE COUNTY.