Frequently Asked Questions

Transcription

1 Frequently Asked Questions In the following pages, we've listed the answers to commonly asked questions. We suggest that you read through this information carefully. It will help you to better understand the value of title insurance in protecting your home ownership, and the general real estate information will help make the home-buying process a smoother one. 1. WHAT IS A TITLE? 2. WHAT IS TITLE INSURANCE? 3. IS TITLE INSURANCE JUST LIKE OTHER INSURANCE? 4. WHY IS TITLE INSURANCE SO IMPORTANT TO YOU AND YOUR FAMILY? 5. WHAT IS A TITLE SEARCH? 6. ARE THERE ANY PROBLEMS THAT A TITLE SEARCH CANNOT REVEAL? 7. WHAT HAPPENS IF THERE IS A PROBLEM? 8. WHAT CAN MAKE A TITLE DEFECTIVE? 9. HOW MUCH COULD I LOSE IF A CLAIM IS FILED AGAINST MY PROPERTY? 10. HOW DOES TITLE INSURANCE PROTECT MY INVESTMENT IF A CLAIM SHOULD ARISE? 11. CAN ONE GET TITLE INSURANCE ON ANY PROPERTY? 12. WHAT DOES TITLE INSURANCE COST? 13. HOW LONG DOES MY OWNER'S TITLE INSURANCE POLICY LAST? 14. ARE THERE DIFFERENT TYPES OF TITLE INSURANCE POLICIES? 15. THE SELLER OF THE PROPERTY I WANT TO PURCHASE HAS AN OWNERS TITLE INSURANCE POLICY. WHY DOES ANOTHER ONE NEED TO BE ISSUED? 16. I PAID FOR MY LENDER'S LOAN TITLE INSURANCE POLICY, DOESN'T THAT PROTECT ME ALSO? 17. WHAT ABOUT A CERTIFICATE OF TITLE? 18. WHAT IS A REVOCABLE (LIVING) TRUST? 19. CAN A TRUST HOLD TITLE TO REAL PROPERTY? 20. WHAT DO I DO IF I HAVE LOST MY ORIGINAL DEED TO MY PROPERTY? 21. I JUST PAID OFF MY MORTGAGE; HOW DO I GET A NEW DEED? 22. I HAVE A DEED FOR MY LAND. DO I NEED ANOTHER DEED FOR MY HOUSE? 23. WHAT IS A CC&R? 24. WHAT IS AN EASEMENT OR RIGHT OF WAY? 25. WHAT IS A SHORT SALE? 26. WHAT IS AN ESCROW? 27. WHY DO I NEED AN ESCROW? 28. WHAT ARE COMMON WAYS OF HOLDING TITLE TO REAL PROPERTY IN OHIO? 29. WHAT IS CONVEYANCE FEE OR TRANSFER TAX? 30. WHAT IS A CLOSING?: 31. WHAT IS A CREDIT REPORT? WHAT IS A TITLE? Title is your right to ownership and possession of your home or property. It is the foundation of property ownership. Title insurance helps protect you from problems that could affect your legal right to own your property. WHAT IS TITLE INSURANCE? Title Insurance protects the insured from losses as the result of claims on one s ownership of land. If the title is insurable, the company guarantees the owner or lender against loss due to any defect in title and will compensate for any valid claims as well as pay for legal fees to defend the title. This is probably one of the most comforting features of Title Insurance. The issuance of title insurance is not merely guess work, nor is it a wager. It is based upon careful

2 examination of the official records of property titles, and the judgmental decisions made by skilled title examiners. IS TITLE INSURANCE JUST LIKE OTHER INSURANCE? No, title insurance is unique in that liability under it ends where liability under other forms of insurance begins. Title insurance insures against the results, acts and defects of the past, whereas other types of insurance protect against happenings or losses in the future. For instance: 1. A title insurance policy issued today insures the holder against defects of the past, occurring prior to the date of the issuance, that may affect the title. The title policy does not insure against defects originating at a later date. 2. Fire insurance, life insurance, accident insurance, etc. protect against happenings in the future. WHY IS TITLE INSURANCE SO IMPORTANT TO YOU AND YOUR FAMILY? A title policy is your assurance that the home you're buying is protected from covered title problems. It's simply something you should have to give you peace of mind and to protect your investment from outside claims. WHAT IS A TITLE SEARCH? 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. It ensures that the only thing you are buying is a new home, and not a slew of unforeseen legal or financial entanglements. Once the search is completed and all issues resolved, title insurance is issued. ARE THERE ANY PROBLEMS THAT A TITLE SEARCH CANNOT REVEAL? Yes. There are some "hidden hazards" that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you've purchased your home and can jeopardize your right to ownership. WHAT HAPPENS IF THERE IS A PROBLEM? The behind-the-scenes work of the title company promotes the efficient and secure transfer of real estate. Title insurance doesn't guarantee that you won't have a problem, but it does give you assurance that the title company will be there to help fix the problem or to compensate you financially on covered claims. A nationwide survey found that in approximately 25% of real estate transactions there are defects in the title that are usually unknown. If not remedied before you buy the property, these problems could hurt your right to own or enjoy the use of the property. Title companies pay millions of dollars each year in claims, losses and legal costs protecting the policyholders. WHAT CAN MAKE A TITLE DEFECTIVE? When you buy a home, it is necessary to know information about other s rights to the property. But even the most diligent search of public records could fail to disclose a number of title defects. There are many hidden defects which may affect the title to real estate. Some examples are: forgeries frauds false Representation

3 lost Wills and wills not properly probated incorrect legal descriptions mistakes at Law mistakes in Description missing or Undisclosed Heirs error in recording, indexing or copying clerical Mistakes illegal Trusts defective Acknowledgments mental incompetence of previous seller false affidavits Some of These defects are of such a nature that they may not appear in the records. Therefore, they may not be picked up by even the most thorough search. HOW MUCH COULD I LOSE IF A CLAIM IS FILED AGAINST MY PROPERTY? That depends on the claim. In an extreme case, you could lose your entire home and property - and still be liable to pay off the balance of your mortgage. Most claims aren't that dramatic, but even the smallest claim can cost you time, money and aggravation, and you may have to pay costs for a legal defense. HOW DOES TITLE INSURANCE PROTECT MY INVESTMENT IF A CLAIM SHOULD ARISE? 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, in accordance with the terms of your policy, you may be reimbursed for your actual loss up to the face amount of the policy. CAN ONE GET TITLE INSURANCE ON ANY PROPERTY? No, title insurance is not intended for titles known to be bad or defective. A title company would not write a title policy when there is a known serious defect, any more that a life insurance company would write a life insurance policy for an applicant whom a doctor reports to be seriously ill. The owner of the property has a deed. Isn't that proof of ownership? Not necessarily. A deed is just a document by which the right of ownership in land is apparently transferred, whatever that right may be. It's not proof of ownership, and it doesn't do away with rights others may have in the property. In addition, a deed won't show you liens or claims that may be outstanding against the title. WHAT DOES TITLE INSURANCE COST? Fees vary, title insurance is inexpensive, typically costing a one-time fee of less than one percent of your home's total value, but the cost is directly related to the value of the property. The higher the value, the more coverage is needed. The premium is a one time only cost that doesn t have to be renewed like other insurance. The federal government and big business companies require it when they deal in property and loans - you could not afford a loss better than they could. If you are in a position to buy property or lend money - be insured, it's a bargain. HOW LONG DOES MY OWNER'S TITLE INSURANCE POLICY LAST? An Owner's Title insurance policy lasts for as long as you or your heirs retain an interest in the property and, in some cases, even beyond. ARE THERE DIFFERENT TYPES OF TITLE INSURANCE POLICIES?

4 Yes. Basically there are two different types of policies an owner's policy and a loan policy. The following is a definition of the common types of policies: OWNER'S TITLE INSURANCE POLICY An owner's title insurance policy protects the insured owner while he owns the property. It also protects the insured after he sells the property, from any loss he many suffer due to the warranty of title contained in the deed which he signs when his sale is made. The premium is paid only once for this protection. The policy guarantees that at the date the deed was filed of record putting title in the insured, the title was free of defects, except those shown in the policy. It guarantees up to the face value of the property. Title insurance protects the buyer by guaranteeing that the title is legally transferable. The policy does not guarantee the actual amount of land. LOAN TITLE INSURANCE POLICY Used for people or companies that lend money. Protects the Lender's lien priority and protects the lender's interest in the property as security for the outstanding balance under the buyer's mortgage. A Loan title insurance policy guarantees to the insured Lender that he has a valid enforceable lien on the property. The amount of coverage decreases as the note is paid off. It does not guarantee anything to the property owner and provides him no recourse to the title company should the title prove defective. If the mortgagee policy holder should foreclose, then the policy would become an owner's title insurance policy to him. THE SELLER OF THE PROPERTY I WANT TO PURCHASE HAS AN OWNERS TITLE INSURANCE POLICY. WHY DOES ANOTHER ONE NEED TO BE ISSUED? The Owners Title Insurance Policy only protects the stated insured on the policy. That policy or protection does not pass to anyone else or any future owners of the property. The seller could also, in a very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. He could get married or divorced, or have a lien filed against the property. It is necessary to conduct an upto-date title search to uncover any such problems and to issue a new policy protecting you, the buyer as the insured. I PAID FOR MY LENDER'S LOAN TITLE INSURANCE POLICY, DOESN'T THAT PROTECT ME ALSO? No. A Loan title insurance policy protects the insured Lender that he has a valid enforceable lien on the property. The buyer is not an insured on that policy and is not protected. It does not guarantee anything to the property owner and provides him no recourse to the title company should the title prove defective. WHAT ABOUT A CERTIFICATE OF TITLE? A Certificate of Title is an attorney's opinion based on a search of the public records. So, once again, even the most exhaustive search of these records may not reveal everything. Unlike a title insurance company, an attorney is not liable if you should suffer loss because of "hidden hazards" in the title. WHAT IS A REVOCABLE (LIVING) TRUST? A trust exists when one person (often called the grantor or the settlor) gives property to another person (called the trustee) to hold and manage for one or more other persons (called the beneficiaries). Under the Ohio Trust Code, a revocable trust (sometimes also known as a "living trust") is a trust that the grantor can amend (change) or revoke (cancel) during his or her lifetime. Through the terms of the revocable trust, the grantor keeps all the benefits of any property placed into it for the rest of his or her life. The grantor also can be the trustee, but the grantor's spouse or a trust company also often serves as trustee. A revocable trust

5 can be funded with any property such as bank and brokerage accounts, stocks and bonds, a home and other real estate. Some revocable trusts may not be funded initially, but rather at a later time or at the grantor's death. An attorney can help advise when a trust should be funded and with what property. The terms of a trust are described in writing in a document often called the declaration of trust or trust agreement. This document is signed by both the grantor and the trustee. CAN A TRUST HOLD TITLE TO REAL PROPERTY? No; the Trustee of the trust can hold title to the real property on behalf of the Trust. WHAT DO I DO IF I HAVE LOST MY ORIGINAL DEED TO MY PROPERTY? The deed, when recorded, became a permanent part of the County property records. You may obtain a copy of your deed from the County Recorder or from a local title company. I JUST PAID OFF MY MORTGAGE; HOW DO I GET A NEW DEED? When a loan has been paid off a Satisfaction of Mortgage will be provided by your lender, and must be recorded to clear your title. You do not get a new Deed for your property. I HAVE A DEED FOR MY LAND. DO I NEED ANOTHER DEED FOR MY HOUSE? NO. Many people purchase a vacant lot prior to constructing a new home or another type of dwelling. We are frequently asked, When do I get the deed for our house? A deed indicates ownership of property, (land). Any improvements or structures placed on the land become a part the land. Whatever is constructed thereafter is automatically yours. WHAT IS A CC&R? The expression covenants, conditions, and restrictions, colloquially referred to as CC&Rs, is commonly used as a reference to limitations or qualifications on land use imposed in a conveyance or other instrument within the chain of title to land. WHAT IS AN EASEMENT OR RIGHT OF WAY? An easement or right of way is an interest in land of another, entitling the holder of the easement to a limited use or enjoyment of the land in which the interest exists. WHAT IS A SHORT SALE? A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens' full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. [1] Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties. A short sale is often used as an alternative to foreclosure it mitigates additional fees and costs to both the creditor and borrower; however both will often result in a negative credit report against the property owner. WHAT IS AN ESCROW? An escrow is the process which was developed to handle, by a neutral third party, the transfer of funds and documents from one party to another upon the occurrence/performance of a specified event/condition. WHY DO I NEED AN ESCROW? An escrow will provide you with a guarantee that no funds or property will change hands until ALL of the terms and conditions have been followed. WHAT ARE COMMON WAYS OF HOLDING TITLE TO REAL PROPERTY IN OHIO?

6 IF YOU ARE AN INDIVIDUAL, THERE ARE SEVERAL WAYS YOU CAN HOLD TITLE: 1. Individually- You, (or your spouse, if applicable) could hold title in your individual name; 2. Tenants-in-Common - This form of taking title exists when two or more persons wish to buy property and own it together. If any of the tenants in common die, their interest passes to their heirs, not to the remaining tenants; 3. Joint Tenants with Right of Survivorship - This form of taking title is similar to the Tenants-in-Common ownership, where two or more persons may acquire title to real estate in varying undivided percentages of interest. Upon the death of one of the Joint Tenants, however, that particular interest automatically passes to the surviving Joint Tenant(s), without the need to go through probate. Often, husbands and wives will take title to real property as Joint Tenants with the Right of Survivorship. WHAT IS CONVEYANCE FEE OR TRANSFER TAX? This is a tax imposed by counties in Ohio on documents conveying land based upon the consideration or value. In Ohio the tax varies by county. In our local area they are currently as follows (subject to change by the county at any time): Wayne County - $2.00 per $1, Holmes County - $4.00 per $1, Ashland County - $4.00 per $1, WHAT IS A CLOSING?: The title company coordinates and/or handles the closing and signing of documents and provides the parties with copies of relevant documents. Makes arrangements for proper payment and distribution of funds and issues the title policies. WHAT IS A CREDIT REPORT? A credit report offers vital information about your credit history. The information in your credit report serves as a reference point for financial institutions considering your creditworthiness. You should check your personal credit report at least twice a year to make sure that the information is correct. Your credit report will contain information on whether or not you have missed, or have been late on your payments in the past (and how late you were). It will also provide details such as your current and previous addresses, social security number, any credit card accounts and current balances you may have, as well as past credit card accounts (often referred to as Revolving Credit ) even if those accounts have been closed or canceled.