Buying or selling a home is, for most people, the largest financial endeavor they will ever undertake. You need to secure the professional services of a title company to efficiently and accurately handle this complex transaction.
The title company will perform an “abstract of title,” which means searching the real estate records in the county where that particular piece of property is located. An abstract will determine the legal owner of the property; reveal any mortgages, liens, judgments, or unpaid taxes that will have to be satisfied before the property is conveyed; and detail any existing easements, restrictions, or leases that affect the property.
After the abstract is completed, the title company will issue a “title opinion letter,” or if a title insurance policy is to be issued on the property, the company will prepare a “Commitment of Title Insurance” to the lender and/or the prospective buyer. The title opinion letter and the title insurance commitment will each set forth all things that need to be completed and any problems that need to be corrected before the purchaser can receive “good title.” The title insurance company will complete all the necessary documents and will undertake to correct any problems. Once these matters are completed, the parties are ready to exchange paperwork and “close” the deal.
The purpose of the closing is to sign and exchange all the documents necessary to convey title, secure the lender, and deal with collateral issues such as leases, rights-of-way, etc., and to explain in an orderly manner the costs to each party. This process involves preparing a closing statement or what is referred to in the industry as a “HUD 1.” The closing statement will include the mortgage lender’s charges, charges for preparing documents, the title company’s fees, recording costs, and the amount of the payoffs to release any existing mortgages, pro-ration of city and county taxes, real estate commission fees, survey fees, and any other costs associated with the deal.
At closing, the title company will collect the purchase money funds from the buyer and lender as well as the settlement costs from each party. With these funds, the title company then pays all of the expenses of the transaction, pays off any existing mortgages, and pays the seller the net proceeds of sale. All of this is done in accordance with the HUD 1 settlement statement.
After the closing, the title company will record the legal documents (deed, mortgage, assignments, etc.) at the county courthouse and then return the original documents to the correct party. New owners receive their deed which should be stored in a bank lock box or other secure location. The lender receives the original mortgage documents which they hold until the loan is paid in full. Once the loan is paid, the lender will “release” their lien against the property at the courthouse and will forward the original mortgage documents to the home owner.
A cashier’s check is acheck guaranteed by a bank, drawn on the bank’s own funds and signed by a cashier. Cashier’s checks are treated as guaranteed funds because the bank, rather than the purchaser, is responsible for paying the amount.
There are several acceptable forms of identification which may be used during the escrow process. One of these forms of identification must be presented at the signing of escrow in order for your signature to be notarized. These include:
- A Current Driver’s License
- Department of Motor Vehicles Identification Card
Mortgage Lenders Requirements
Make sure you have satisfied your lenders requirements before coming to the title company to sign paperwork.
Fire & Hazard Insurance
When you are buying a single-family, detached home (and in some cases a townhome), be sure to order your insurance before the loan has been approved. Next, call your escrow officer with the insurance agent’s name and number so that they can make sure the policy complies with your lenders requirements. You must have insurance in place before the lender can send funds to the title company. If you do not have an insurance agent, your real estate agent can offer some suggestions.
Vesting for Property Title
Decide how you would like to hold title to your new home. You may wish to consult a lawyer, accountant, or other qualified professional before making this decision.