Escrow companies act as neutral third parties between the buyer and seller during a real estate transaction. They hold the deposit money and direct all of the paperwork involved in the transaction, including loan documents, title insurance, appraisals, home warranties and homeowner's insurance.
If the buyer or seller has specific instructions they want included in the deal, they or their representative will relay this to the escrow company to ensure it is included in the close.
Other roles of Escrow include:
-Request payoff figures from underlying lenders
-Work with appropriate parties to clear all "clouds" on title
-Receive and review loan documents
-Prepare Settlement Statements (These show all monetary aspects of the transaction)
-Prepare escrow instructions and pertinent closing documents including the Deed
-Obtain signatures from seller. Obtain signatures and closing funds from buyer
-Buyer and seller can carefully review Settlement Statements and Documents at this time and should feel free to ask any questions they might have. The buyer's funds need to be in the form of a cashiers check or a wire transfer from buyer's bank to escrow account.
A title insurance policy is a contract by which the title insurance company agrees to indemnify the insured against losses incurred by reason of defects in the title, other than those listed in the policy. Unlike other forms of insurance against events that might occur in the future, title insurance insures against any defects which have occurred prior to the insured's interest in the property.
Normally, the seller will pay for a purchaser's Standard title policy for the buyer at the time of closing. If the buyer is getting a loan from a lending institution, the lender will usually require that the buyer furnish an Extended "ALTA" policy on its behalf, also issued at closing. Policy formats and coverages are determined by the American Land Title Association (ALTA), which provides nationwide uniformity and maximum coverage for lenders.
Policies typically insure against any loss by reason of title (ownership) to the estate being other than as stated, any lien or encumbrance of public record not stated, lack of access to and from the land, priority of the insured mortgage or trust deed being other than stated, any defect in the execution of the insured mortgage or trust deed, any statutory lien for labor or material which has gained or may gain priority over the insured loan.
Title insurance policies normally do not cover losses arising from public land use controls, zoning, governmental rights, police power or eminent domain, liens or encumbrances created by or agreed to or known by the insured at the time of the policy, claims of usury, violations of the Truth-In-Lending-Law, and encumbrances mentioned as exceptions. If an Owner's Extended Policy has been requested, a physical inspection will be done. If the inspector detects an unrecorded easement or other evidence of outstanding rights that could affect the owner¹s title and possibly the value and intended use, the title insurance company tells the buyer of these things before he or she closes the purchase. Title insurance can protect the buyer from unrecorded easements or rights, if not disclosed on an Owner's Extended Policy.
Why Do You Need Title Insurance?
You need title insurance because any home, no matter how new or apparently secure, is built on land as old as the earth itself. Undoubtedly, this land has had many previous owners. Claims against any one of these persons can be filed against the property and against you as the present owner. Such hazards as fraud, missing heirs, old liens and many others can, and often do, arise like ghosts out of the past.
Title insurance protects you against claims and title faults. It makes your home safely yours. Your title insurance policy is your shield of protection and will defend your ownership against loss. You pay one premium only so your protection and peace of mind last as long as you and your heirs remain in ownership.
Who Pays for Title Insurance?
Customarily, the buyer pays for the title insurance premium that protects the buyer's title to the property. If the buyer is obtaining a loan to purchase the property, the lending institution will usually require their own insurance policy to protect their collateral interest in the property as well. The buyer is also responsible to pay for the lender's title policy as one of the costs of borrowing the money, unless the seller has agreed to pay that portion of the buyer's closing costs.
What Type of Policy Does My Customer Need?
Owner's policies are issued to buyers of real estate when they have the title to the property conveyed to them by deed or real estate contract. A lender's policy is issued to the lender to protect their interest in the property secured by a deed of trust or a mortgage. Most lenders usually require a Lender's Extended Coverage Policy, which provides additional protection against special risks.
An Owner's Extended Coverage Policy provides the same coverage as an Owner's Policy and also provides additional risk protection to cover losses such as questions of survey, including lot size, location of boundaries and easements, unrecorded liens for labor and materials, parties in possession of the property not disclosed by public records, and breach of Covenants, Conditions, and Restrictions.
There is an additional premium for an extended coverage policy to cover the additional risks. A survey commonly called an "ALTA" survey may be required to issue an Owner's Extended Coverage Policy. Due to the additional costs of the premium and survey, careful consideration should be given to specifics of the property and buyer's intended use of the property before Owner's Extended coverage is ordered.
If the Seller Was Insured When the Property Was Purchased, Why Should S/he Have the Title Policy Re-issued to the New Buyer of the Property?
The coverage of the title policy is against all matters that appeared of record
up to the date of issuance of the current owner's policy. Since that time, many
documents may have been recorded, some of which may affect the title to the
land. Taxes and assessments may have accrued and be unpaid. There may have been
actions in court affecting the seller's title. The purchaser is entitled to
have full information and protection as to the condition of the title right
up to the date of his/her purchase. In addition, there may be matters of record,
which would prevent either the seller or buyer from selling, buying or mortgaging
land until such matters have been cleared. These items include such things as
federal tax liens, judgments, incompetencies, divorce actions and other conditions,
which the title search may disclose.