TITLE & ESCROW
Need to know more about title and escrow in general? Let's take a look at these FAQ's.
What is title?
Just as you have a title for your car proving ownership, a house has a title as well. For every real estate transaction (be it a personal home or vacant lot or commercial building), Stewart Title/Western Division researches the property’s past ownership to ensure that the title of the property transfers to the right person without any issues. What issues might those be? Perhaps the previous owner has unpaid loans to the sanitation company. There could be multiple issues stacking up on the title, and Stewart Title/Western Division’s job is to find them, present them in a Title Commitment, and get them resolved during the escrow process.
What is a Title Commitment?
A title commitment is an offer to provide title insurance coverage for a property assuming all conditions within are met. These conditions are found in the commitment's three sections called Schedules. Schedule A sets forth the types of policies to be issued, the proposed insured parties, as well as the current owner and description of the property. Schedule B Part 1, includes the items required to close the escrow and insure, including matters that need to be dealt with by payment, documentation etc., and a list of conditions that must be met (such as an unpaid sewer bill or paying off the current mortgage). Schedule B Part 2, shows all other matters affecting the property, (such as CC&R's or an easement on the property for a fire hydrant)that will remain on the title policy.
Based on the contents of the commitment, our title department will color-code the report to make it easy to know how simple or complicated a deal may be. Green indicates there are no adverse matters found on the title, yellow means some particular matters have been found that require special attention by all parties, and red says there are major issues with may delay closing and need immediate attention. Any issues found on the title are resolved in the escrow process.
What is escrow?
Escrow, in basic terms, is the process in which an owner sells their property to a buyer with the aid of a disinterested third party. Stewart Title/Western Division’s escrow officers act as that third-party, coordinating the sale between the buyer, seller, any real estate agents, lenders, and other involved professionals. The escrow officer will collect earnest money, manage funds, complete documents for the government, and finally sign the property’s title over to the new owner. That’s just a small glimpse at the escrow process and what you’ll expect during the closing process.
What services will I be paying for when I pay closing costs?
You will usually be paying for such things as real estate commissions, appraisal fees, loan fees, escrow charges, advance payments such as property taxes and homeowners insurance, title insurance premiums, pest inspections and the like.
Who will pay for the title insurance charges, the buyer or seller?
In most cases the seller, to show the purchaser that he is getting a good title, will pay for an owner’s policy issued to the purchaser in the amount of the sales price. The purchaser, in most cases, pays for a lenders policy of title insurance in the amount of any loan obtained by the purchaser.
When the escrow closes, how can I (the buyer) pay for the closing costs?
With a term we call Good Funds. You can pay by cashier's check (from a local credit union or national bank), certified check, or wire transfer. No cash, gold bars, coins, Bitcoins, or unicorn horns can be accepted to pay for escrow.
Why are separate owner’s and lender’s title insurance policies issued?
Both you and your lender will want the security offered by title insurance. Your home is an important purchase and you will want to be certain your home is yours, all yours. Title insurance companies insure your rights and interests in order to protect you against claims.
Your lender is looking to insure the enforceability of their lien on your property and marketability. What is meant by “marketability”?
Well, we in Nevada have long been importers of mortgage money. Local lenders will “originate” a loan here and often sell it to an out-of-state investor, who may never see the property. Title insurance is the way of making certain that the investor a valid and enforceable lien. Without a current title policy, the loan is essentially unmarketable.
How much should I expect to pay in closing costs?
The amount you pay for closing costs will vary; however, when buying your home and obtaining a new loan, an estimate of your closing costs will be provided to you pursuant to the Real Estate Settlement application. This disclosure provides you with a good faith estimate of what your closing costs will be in real estate process. An itemized list of charges will be prepaid when you close your transaction and take title to your new property.
Can I pay for my closing costs in installments?
No, and it is easy to understand why. Many different parties will have fulfilled their responsibilities and be waiting payment upon closing. The title company will disperse monies to those parties, pursuant to the escrow instructions, when funds are available.
Will I be allowed to write a personal check to cover my closing costs?
Your closing funds should be in the form of a cashier’s check, issued by a Nevada institution, made payable to the title company in the amount requested. A personal check may delay the closing or may be unacceptable. An out-of-state check could also cause a delay in your closing due to possible delays in clearing the check.
What does my title dollar pay for?
Title insurers, unlike property or casualty insurance companies, operate under the theory of “risk elimination.” Risk elimination can only be accomplished after an intensive period of risk identification. Title companies spend a high percentage of their operating revenue each year collecting, storing, maintaining, and analyzing official records to information that affects title to real property.
The issuance of a title insurance policy is highly labor-intensive. It is based upon the maintenance of a title “plant” or library of title records, in many cases dating back over a hundred years. Each day, recorded documents affecting real property are posted to these plants so that when a title search on a particular parcel is requested, the information is already organized for rapid and accurate retrieval.
Stewart Title/Western Division’s trained title experts are able, with the aid of their extensive title plants, to identify the rights other may have in your property, such as recorded liens, legal actions, disputed interests, rights of way or other encumbrances on your title. Before closing your transaction, you can seek to “clear” those encumbrances which you do not wish to assume.
The goal of the title companies is to conduct such a thorough search and evaluation of public records that no claims will ever arise. Of course, this is impossible- we live in an imperfect world, where human error and changing legal interpretations make 100% risk elimination impossible. When claims arise, title insurance companies have professional claims personnel to make sure that your property rights are protected pursuant to the terms of your policy.
To conclude, when you pay for your title insurance policy, you are paying for a team of professionals who have worked together to deliver you a title insurance policy which represents protection for your ownership of real property.
Is it a law in Nevada that I must purchase title insurance when I buy or refinance a home?
No, however, virtually all lenders require title insurance for the face amount of their deed of trust, whether purchase or refinance. Prudent owners also value the protection afforded by the payment of the one-time title insurance premium.
How much can I expect to pay for title insurance?
This point is often misunderstood. Although the title company usually serves as a meeting ground for closing the sale, only a small percentage of total closing fees are actually for title insurance protection. Your tile insurance premium will most always amount to less than 1% of the purchase price of your home, and less than 10% of your total closing costs. The title policy is good for as long as you own the property with the payment of only one premium.
Who can I look to for straight answers on title and closing costs?
Stewart Title/Western Division personnel are available to review and explain your title policy and your closing statement. Should you still have further questions or need legal or tax advice, your title or escrow office can help by referring you to the proper source for your answer. Remember, the title or escrow officer is not a legal counsel and cannot give you legal advice. It is their responsibility to give impartial service to all customers.