Q: What is a title?
A: When you purchase a home, you are really purchasing the title to the property—which is the right to occupy and use the space. That title may be contested based upon past rights and claims asserted by others. These types of claims can infringe upon your purchase of the property or cause you to lose money.
Q: What is a title search?
A: A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes and many other documents. The purpose of the search is to verify the seller’s right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property.
Q: What kinds of problems can a title search reveal?
A: A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Q: Are there any problems that a title search cannot reveal?
A: Yes. There are some “hidden hazards” that even the most diligent title search may never reveal. For instance, incorrectly stating marital status resulting in a possible claim by a legal spouse, fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records are just a few examples. These defects can arise after you’ve purchased your home and can jeopardize your right to ownership. “Title insurance” protects your right to ownership.
Q: What is title insurance?
A: Title insurance is your policy of protection against loss if any of these problems (even a “hidden hazard”) results in a claim against your ownership.
Q: How does title insurance protect your investment if a claim should arise?
A: If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense—and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
Q: What are closing costs?
A: Closing costs are all costs required to close the real estate transaction. They can include (but are not limited to) surveying fees, property taxes, title insurance, attorney fees, agent fees, points, loan origination fees, primary mortgage insurance (PMI) and the balance of your down payment. Prior to closing, you should review your financial closing statement/HUD-1 Statement to ensure that all the calculations are correct and that you have been given the correct credit for deposits and other agreed upon buyer and seller credits. Also recheck all lender, title and escrow fees to make sure they are accurate.
Q: What is a closing?
A: “Closing,” which is also known as “settlement” or “escrow,” is the event where the title to a property is transferred from seller to buyer. “Closing” is typically held in an office, such as that of a title agent or title insurance company and involves the completion of all the necessary paperwork to finalize the agreement between buyer and seller. In addition, all financial issues are settled at closing—closing costs—and once the title is successfully transferred, the necessary documents are prepared, signed and filed with local authorities.