The Role of the Title Company
Now that you've decided to buy a home, what happens between now and the time you legally own it? The next step is to obtain title for the property from the title company. A title gives the owner the right to possess and use the property. But before receiving title, the title company will need to complete the following:
Earnest money: To show the seller and his agent you are a serious buyer, you will be asked to give the title company a deposit called earnest money. If the sale goes through, the earnest money is applied toward the down payment. If the sale falls through, the earnest money will not be given back unless it is stated in the offer to purchase that it is refundable.
Title search: A title search is a thorough check of the records concerning the property. It is performed to verify the seller's right to change ownership. A title search will uncover any demands, faults and other privileges or restrictions on the property.
Document preparation: Appropriate forms are prepared for settlement.
Settlement: Many events happen during settlement; the seller signs the deed, the buyer signs the new mortgage, the old loan is paid off and the new loan is established. The seller, real estate professionals, attorneys, surveyors and others performing services for the parties are paid. Title insurance policies are then delivered to the buyer and their lender.
Why do I need title insurance?
Owning real estate is one of the most precious values of freedom in this country. You want the assurance that the property you are buying will be yours. Other than your mortgage holder, no one else should have any claims or restrictions against your home.
Title insurance eliminates any risks and losses caused by faults in title from an event that occurred before you owned the property.
How does title insurance differ from other types of insurance?
Title insurance is different from other types of insurance in that it protects you, the insured, from a loss that may occur from matters or faults from the past. Other types of insurance such as auto, life or health cover you against losses that may occur in the future. Title insurance does not protect against any future faults.
Another difference is that you pay a one-time premium. A title insurance policy will protect you from risks" or undiscovered interests.
There are two principal forms of title insurance:
1. The lender's policy
2. The homeowner's policy
What is a lender's policy?
A lender's policy protects the mortgage holder. If there is a fault in title that results in a loss, the mortgage holder will be paid back.
What is a homeowner's policy?
A homeowner's policy protects you, the purchaser, against a loss that may occur from a fault in your ownership or interest you have in the property. You should protect the equity in your new home with a title policy.
What does a homeowner's policy provide?
Protection from financial loss due to demands that may be charged against the title to your home, up to the cost of the title policy.
Payment of legal costs if the title insurer has to defend your title against a covered claim.
Payment of successful claims against the title to your home covered by the policy, up to the cost of the policy.
What "hidden risks" are protected under a title policy?
- False impersonation of the true owner of the property by the seller or other persons previously in title
- Forged deeds, releases and other documents
- Deeds by persons of unsound mind
- Deeds by minors
- Invalid documents completed by an expired attorney
- Invalid deeds delivered after the death of the grantor
- Deeds by supposedly single persons but actually married
- Claims for unpaid estate inheritance and gift taxes against prior owners of your home
- Unrecorded easements - giving one party the right to enter another party's property
- Undisclosed descendants of former owners of your home or the land on which it is situated
How long does my coverage last?
Once purchased, title insurance remains in effect for as long as you own your property. Title insurance adds security and peace of mind to home ownership.
How do I obtain title insurance and what does it cost?
Let the title company, attorney or agent handling the closing of your property know that you want to purchase an Owner's Title Insurance Policy. When choosing a title insurer, you should look for a company with experience, as well as the financial strength to protect you.
In most states, the insurance commission or some other governmental body controls the premiums for title insurance policies. You only pay the premium once. The cost depends upon the purchase price of the property, and your policy amount must be equal to the purchase price.
Breckenridge real estate offers a wide variety of choices when it comes to finding the right property. Luxury homes, mountain cabins, townhomes, condos and acreage are available for homebuyers looking to settle in this wonderful mountain town. To buy or sell in the Breckenridge Real Estate area, contact the experienced real estate professionals at Ten Peaks Sotheby's International Realty.