What is “Title?”

    what is title insurance

    If this is the first time you’ve been involved in a real estate transaction, get ready to learn a whole new language. From contract contingencies to encumbrances, the home sale and purchase processes bring with them a vocabulary of their own.

    Heck yeah, it’s confusing – especially since it seems most real estate agents and mortgage people don’t get that not everyone knows what all this stuff means.

    One of the words I find that most of our clients are confused about is “title,” and, in fact, the title company’s role in the real estate transaction may seem a bit mysterious.

    For the record, Black’s Law Dictionary defines the word “title,” in property law, as “. . . the means whereby the owner of lands has the just possession of his property.”

    The title company is the party responsible for ensuring that the homeowner truly has “just” possession of the property, and the legal right to “convey” (fancy word for “sell”) that possession to the buyer.

    But, that’s not all the title company will do during your Billings real estate transaction. It also functions as the transaction’s facilitator, a neutral third party who ensures the terms of the contract are carried out until closing.

    The process

    After the seller accepts an offer on a home the executed (signed) contract is passed off to the title company where it will eventually meet up with the closing agent.

    This person is responsible for following the instructions in the contract, to the letter. He or she will accept your earnest money deposit and start a file for the transaction.

    This file will contain:

    • tax information
    • the property survey (if one is required),
    • the seller’s loan payoff information
    • covenants and restrictions
    • SID information

    and any other documentation required for the transaction. He or she will also order a title search.

    Researching the home’s title

    To ensure that the person selling the home actually has the right to do so requires a thorough search of public records. It includes looking through divorce settlement records, probates, deeds, liens, wills and more. Any type of a publicly recorded record that might have anything to do with real property is searched.

    If the search doesn’t bring up any problems (known as “clouds” or “defects” on the title), the title company will issue a preliminary title report and you’ll receive a copy of it.

    Then, they will issue a lender’s title insurance policy. Although the buyer pays for the policy, the lender is the only party to benefit from the insurance should there be a claim in the future.

    You can purchase an owner’s title insurance policy, although it’s not mandatory, like the lender’s. Some sellers will purchase this for the buyer.
    Both policies require a one-time expense, at closing, and last for the life of the loan.

    Speaking of expense, the cost of a Billings title insurance policy varies, according to loan amount.

    What about you . . . any part of the vocabulary or process of real estate have you confused? Let me know and I’ll clear it up for you.

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