Courtesy of Amberglen Townhomes in the Tanasbourne Neighborhood of Beaverton, Oregon right on the border of Hillsboro
WHAT IS TITLE SEARCH?
A title search
is a means of ascertaining that the person who is selling the
property really has the right to sell it, and that the buyer is
getting all the rights to the property that he or she is paying
for.
Fidelity Title examines several aspects during a title search.
For example:
Chain of Title — This is simply a history of the
ownership of a particular piece of property, describing who bought
it and sold it, and when. The information may be derived from
public records—usually a County Clerk's or Recorder's Office—or
obtained from title plants privately owned and maintained by Fidelity
Title. Because the history of title goes back many decades, these
records can take the form of index cards, punch cards, tract books,
or one of today’s digital formats. Regardless of format,
our title plants contain essentially the same information by which
a title history can be determined.
Tax Search — This is a search to determine the
present status of general real estate taxes against the property.
If a buyer purchases property with unpaid and past due taxes or
assessments against it, he or she is likely to find a government
body —the village, county or state—placing the property
up for sale to pay those taxes or assessments. Title insurance
from Fidelity protects the buyer against loss from unpaid and
past due taxes and assessments.
Report on Possession — We often send inspectors
to look at the property to verify the lot size, check the location
of improvements, look for evidence of easements that are not shown
of record and check on who is living there. This eyewitness account supplements the information learned from
the title search. For example, the inspector might detect an unrecorded
easement or other evidence of outstanding rights that could affect
the owner's title and possibly the value and intended use of the
property.
Judgment and Name Search — One of the most important
parts of the title search is to determine if there are any unsatisfied
judgments against the seller or previous owners which were in
existence while they owned the title. A judgment is a general
lien against the debtor's real estate and constitutes security
for any money owed under the judgment. The real estate can be
sold to satisfy the judgment.
It is extremely important to be sure that a title is not subject
to judgments against the seller or previous owners. Title insurance
provides this protection. A judgment against a person named Smith
may affect the title of a seller named Smith, depending on whether
or not they are the same person. So all possible variations of
the name must be examined.
For example, the name Smith might be spelled Schmidt, Schmid,
Schmidtt, Schmidz, Schmied, Schmiedt, Smid, Smythe, and so on.
The name Nichols can be spelled 73 different ways, from Nachols
to Nychals.
The task is to determine which of these applies to the owner in
question. First names have to be checked, too. There are 25 foreign
forms of John, including Johann, Jehan, Hans, Shaun, Gudi, and
Efom.
Commitment — When these searches have been completed,
Fidelity Title issues a commitment to insure, stating the conditions
under which it will insure the title. The buyer and seller and
the mortgage lender can proceed with the closing of the transaction
after clearing up any defects in the title which may have been
uncovered by the search and examination.
WHAT IS ESCROW?
An escrow is an arrangement in which an objective third party,
called an escrow holder, holds legal documents and funds on behalf
of a buyer and seller, and distributes them according to the buyer's
and seller's instructions.
People buying, selling and refinancing real estate often
open an escrow for their protection and convenience. The buyer
can instruct the escrow holder to disburse the purchase price
only upon the satisfaction of certain prerequisites and conditions.
The seller can instruct the escrow holder to retain possession
of the deed to the buyer until the seller's requirements, including
receipt of the purchase price, are met. Both rely on the escrow
holder to carry out faithfully their mutually consistent instructions
relating to the transaction and to advise them if any of their
instructions are not mutually consistent or cannot be carried
out.
An escrow is convenient for the buyer and seller because
both can move forward separately but simultaneously in providing
inspections, reports, loan commitments and funds, deeds, and many
other items, using the escrow holder as the central depositing
point. If the instructions from all parties to an escrow are clearly
drafted, fully detailed and mutually consistent, the escrow holder
can take many actions on their behalf without further consultation.
This saves much time and facilitates the closing of the transaction.
THE PLAYERS
A number of different parties are involved in the process
of refinancing or transferring ownership of real estate. You can
expect to see any or all of them at the closing itself.
Your Real Estate Agent — Acts as an intermediary
between you and the seller. Generally assists in helping you purchase
property for the lowest possible price and best terms.
Seller — Signs the deed over to the buyer and presents
the keys to the home.
Seller’s Real Estate Agent — This real estate
agent represents the seller (who may not be present at the closing
itself). Generally assists in helping the seller get the highest
possible price and best terms for the property.
Escrow Officer — An objective third party who processes
and disburses funds in accordance to the instructions provided
by the seller and buyer. The escrow officer is often a representative
from the Fidelity Title.
Settlement Agent — A representative from Fidelity
Title, this person is responsible for facilitating the closing
by preparing and recording documents.
Lender/Bank —The institution (usually a bank or
mortgage company) that lends the money to the buyer. The lender
is often called the “mortgagee", while the borrower
is referred to as the “mortgagor".
Loan Servicer — The institution that will receive
and process your mortgage payments and manage your escrow account.
This is often the lending institution, but not always.
THE DOCUMENTS
You will be asked to initial or sign a number of documents during
the closing. Among the most important are:
Good Faith Estimate — A written estimate provided
by the lender of all charges—including closing costs and
pre-paid and escrowed items—which you are likely to pay
at closing. You should receive this within three days of submitting
your loan application. You’ll want to compare your estimate
with the HUD-1 (see below) before your closing date.
Mortgage Note — A promissory note that states your
intention to pay a specific sum of money at a specified rate of
interest within a fixed period of time.
Mortgage — A legal document that gives the lender
the right to take possession of the property if the borrower fails
to pay off the loan. In some states, this is known as a “deed
of trust".
Certificate of Occupancy — A document issued by
a local municipality stating that the home meets all building
codes and is suitable for habitation. You’ll see this document
if you’re purchasing a newly built or renovated home.
HUD-1 — Also called the “settlement statement".
This document provides an itemized breakdown of all costs and
disbursements associated with the sale of the home. You are entitled
to review this document a day before closing, so you should compare
it with your Good Faith Estimate and resolve any issues before
settlement.
Final TILA statement — Your “Truth In Lending
Act” statement. This will disclose the full cost of your
mortgage and annual percentage rate (APR). It will show any modifications
such as rates and points that may have been made since applying
for the loan.
CLOSING COSTS
Closing costs are all of the expenses associated with
the purchase, sale or refinancing of property. These charges will
vary widely from state to state and lender to lender, but will
likely include:
Points — Money paid by a borrower to the lender
in exchange for a lower interest rate. Each point equals 1% of
the loan amount.
Mortgage Application Fees — Charged by the lender
to cover the costs of processing a loan application. It’s
sometimes paid up front at time of application; otherwise, it’s
included in the closing costs.
Appraisal Fees — The cost of paying a professional
to assess the fair market value of the property. Usually required
as a condition of the loan.
Inspection Fees — The fees charged for home, pest
and other inspections. Lenders sometimes require inspections to
verify that the property is in good condition and will retain
its collateral value.
Survey Fee — The charge for confirming the lot
size and shape and to check for any encroachments.
Title Search Fee — Paid to Fidelity Title to verify
that the home’s title is “in the clear", (i.e.
that there are no liens or outstanding claims on the property).
Title Insurance Premium — The lender's policy covers
only the lender and is required in most cases. A buyer's policy
is optional but highly recommended, and is usually very affordable
if purchased at the same time as the lender's policy.
Recording Fees — Charged by the local register
of deeds to make the transfer of property a matter of public record.
Pre-paid Property Insurance —The first full year's
property insurance premium, paid in advance, directly to the homeowners
insurance company.
Pro-rata Property Taxes — An adjustment to ensure
that both the seller and the buyer pay their share of the annual
property tax, proportionate to the percentage of the year that
each has ownership of the property.
Pro-rata Interest — An adjustment to cover the
interest on the loan for the number of days until the first payment
is due.
THE PROCESS
Even though “closing” or “settlement”
often refers to the actual day that the transaction is finalized,
it’s actually a process that begins as soon as a purchase
contract is signed.
PRE-CLOSING
Inspection — You’ll want to be sure the home
you’re purchasing doesn’t have any major flaws. Hire
a professional inspector to walk you through the property and
point out any issues. You should also receive a written summary
of his/her findings.
Appraisal — Your lender will require an appraisal
of the property’s fair market value to ensure that they’re
not lending you more than the house is actually worth. Your real
estate agent can help you find a licensed appraiser, but most
lenders have their own and will take care of scheduling this directly
with the realtor, or homeowner.
Title Insurance — It’s a good idea for you
to take out title insurance before you purchase the home, to protect
you against any unforeseen claims that may arise. (Get a Guaranteed
Rate Quote)
Homeowner’s Insurance — Because your new
home will be used as collateral against your loan, your lender
will require that you secure homeowner’s insurance. Be sure
to take care of this well in advance of the closing date. You
will likely be required to show proof of purchase, so ask your
insurance company for a binder.
Walk-Through – Within 24 hours before your closing
meeting, be sure to conduct a walk-through of the property to
ensure that it’s in good condition and that any issues and/or
contingencies have been resolved.
While you’re handling all of the above, Fidelity Title will
be conducting a search on the property’s title. We pore
through property records looking for potential problems that might
prevent a smooth transfer of ownership, such as old liens, tax
liability, and housing code violations.
We may also physically inspect the property to verify the lot
size and check for unrecorded easements. Once our work is complete,
we offer title insurance to the lender, to protect the bank from
any undiscovered issues surrounding the title. (Because the lender’s
policy protects only the lender, you’ll want to be sure
you’re covered by a title insurance policy of your own.)
Meanwhile, one of our settlement agents is hard at work coordinating
a lot of details. First, he/she looks over the purchase contract
to make sure it’s complete and accurate. If you’ve
paid a deposit or “earnest money,” the agent places
the funds into an escrow account. He/she also coordinates the
payoff of an existing mortgage, making sure the payoff figure
is available for the final closing.
If there are any problems with the property, we bring them to
the attention of all parties involved. In short, we coordinate
many behind-the-scenes activities and gain the cooperation needed
to ensure a smooth transaction.
CLOSING
When “closing
day” finally arrives, you’ll meet with several parties
to finalize the transfer of property. Generally, the steps are:
Sign Documents — You’ll be asked to initial
or sign a number of documents.
Pay Closing Costs and Escrow — You should arrive
at closing with a certified check to pay for closing costs.
Handing Over the Keys — Once all the papers are signed and the property has been recorded through title you’ll receive the house keys from the seller.
POST-CLOSING
After the settlement
meeting, we officially record the mortgage and deed at your local
Recording Office or Register of Deeds. Funds held in escrow, such
as broker commissions and money owed to the seller, are disbursed
after the transaction is recorded at the municipal office.
FAQs
