FAQ About Land Title Insurance
What is the new Home Equity law in Texas?
You Can Become a Homeowner.
What is Title Insurance?
What's in a Title Search?
Why do you need title insurance?
What Happens in Escrow?
What is tenants and lenders insurance?
How you can help your broker get the most for your house?
How Real Estate agents help sellers make money?
What are the ways to easier settlements?
What are Ad Valorem or property taxes?
What is a Homestead? and other Property Facts?
The House Hunter's Scorecard
HOME EQUITY IN TEXAS top
after January 1, 1998
What is a Texas home equity loan?
On November 4, 1997, Texas voters approved an amendment to the Texas Constitution allowing home equity lending. This amendment is long and complicated, but creates the complete framework for home equity lending in Texas. A home equity loan allows the homeowner to borrow money using the homestead as collateral for the loan. These loans were prohibited before the amendment passed. The amendment is effective January 1, 1998.
What’s special about Texas home equity loans?
The amendment has many special features. Some are as follows:
1. Total debt, including the home equity loan, cannot exceed 80% of the agreed fair market value of the property.
2. Maximum fees and costs cannot exceed 3% of the loan. Such fees include lender costs, tax reports, title insurance premiums and surveys.
3. 12 days must pass between the loan application and closing.
4. The loan cannot be funded until a 3 day rescission period passes.
5. Borrowers have no personal liability; the property is the only security for the loan.
6. The loan can only be foreclosed judicially. Other loans in Texas can be foreclosed non-judicially.
How often can I take out a home equity loan?
Only one home equity loan can be taken out in any 12 month period.
Can I have more than one home equity loan at a time?
No. Only one home equity loan can be placed on homestead property.
If I refinance other loans (purchase money, home improvements and the like) can I get home equity money?
Yes. But, beware -- any home equity money makes the entire loan a home equity loan. Then, you are limited to only one open home equity loan at a time and only 1 every 12 months.
Can the lender require other security for a home equity loan?
No. Only the home can be security for a home equity loan.
Can agricultural land be used as security for a home equity loan?
No. Any land used for agricultural purposes cannot be used for a home equity loan. Agricultural use is any land that receives an agricultural or open space exemption for ad valorem property taxes.
What about dairy farms?
Dairy farms may be used as collateral for a home equity loan.
Where can the home equity loan be closed?
Home equity loans must be closed only at the lender’s office, a title company or an attorney’s office. Such loans may not be closed at your home or office.
Must the loan have regularly scheduled payment?
Yes.
What kind of lender can make a home equity loan?
Banks, savings and loan associations, saving banks, credit unions, other federally chartered instrumentalities or persons approved by the U.S. Government can make home equity loans.
Can a private person make a home equity loan?
Yes. The seller in a seller financed loan can make a home equity loan, so can some family members.
Can the lender require me to pay off unsecured consumer debts with my home equity loan?
No. Of course, you can choose to pay off those debts with the loan proceeds, if you want..
Are there other things the lender must do?
Yes. The lender cannot require an assignment of wages, or confessions of judgments, or powers of attorney to the lender. The lender cannot accept or give you any documents with blanks not filled in when you sign. The lender must give you a copy of every document that you sign.
Are there disclosures the lender must give me?
Yes. The notice must read as follows:
NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION: Section 50(a)(6), Article XVI, of the Texas constitution allows certain loans to be secured against the equity in your home. Such loans are commonly known as equity loans. If you do not repay the loan or if you fail to meet the terms of the loan, the lender may foreclose and sell your home. The constitution provides that: (A) the loan must be voluntarily created with the consent of each owner of your home and each owner's spouse; (B) the principal loan amount at the time the loan is made must not exceed an amount that, when added to the principal balances of all other liens against your home, is more than 80 percent of the fair market value of your home (C) the loan must be without recourse for personal liability against you and your spouse unless you or your spouse obtained this extension of credit by actual fraud; (D) the lien securing the loan may be foreclosed upon only with a court order; (E) fees and charges to make the loan may not exceed 3 percent of the loan amount; (F) the loan may not be an open-end account that may be debited from time to time or under which credit may be extended from time to time; (G) you may prepay the loan without penalty or charge; (H) no additional collateral may be security for the loan; (I); the loan may not be secured by agricultural homestead property, unless the agricultural homestead property is used primarily for the production of milk; (J) you are not required to repay the loan earlier than agreed solely because the fair market value of your home decreases or because you default on another loan that is not secured by your home; (K) only one loan described by Section 50(a)(6), Article XVI, of the Texas constitution may be secured with your home at any given time; (L) the loan must be scheduled to be repaid in payments that equal or exceed the amount of accrued interest for each payment period; (M) the loan may not close before 12 days after you submit a written application to the lender or before 12 days after you receive this notice, whichever date is later; and if your home was security for the same type of loan within the past year, a new loan secured by the same property may not close before one year has passed from the closing date of the other loan; (N) the loan may close only at the office of the lender, title company, or an attorney at law; (O) the lender may charge any fixed or variable rate of interest authorized by statute; (P) only a lawfully authorized lender may make loans described by Section 50(a)(6), Article XVI, of the Texas Constitution; and (Q) loans described by Section 50(a)(6), Article XVI, of the Texas Constitution must: (1) not require you to apply the proceeds to another debt that is not secured by your home or to another debt to the same lender; (2) not require that you assign wages as security; (3) not require that you execute instruments which have blanks left to be filled in; (4) not require that you sign a confession of judgment or power of attorney to another person to confess or appear in a legal proceeding on your behalf; (5) provide that you receive a copy of all documents you sign at closing; (6) provide that the security instruments contain a disclosure that this loan is a loan defined by section 50(a)(6), article XVI, of the Texas Constitution; (7) provide that when the loan is paid in full, the lender will sign and give you a release of lien or an assignment of the lien, whichever is appropriate; (8) provide that you may, within 3 days after closing, rescind the loan without penalty or charge; (9) provide that you and the lender acknowledge the fair market value of your home on the date the loan closes; and (10) provide that the lender will forfeit all principal and interest if the lender fails to comply with the lender's obligations. |
What types of title policies are available for home equity loans?
The Texas Land Title Association has presented to the Texas Department of Insurance for approval an endorsement to the standard mortgagee policy form for use with home equity loans. Approval of this endorsement is expected in mid-December 1997 to be effective January 13,1998. This endorsement will modify and define certain words and phrases of the standard Texas mortgagee policy to conform with the new Texas home equity loan law. It will provide specific additional coverage as to certain requirements of the Texas law. If adopted, there will be no charge for this endorsement to the standard mortgagee policy.
Is there a product other than a full title policy?
There is currently being proposed by TLTA, a modified version of the ALTA Junior Lien policy. This product bears a reduced premium. The TLTA expects to submit this Junior Policy for approval by the Texas Department of Insurance, in late November, 1997. A date for approval of this form has not been set by TDI at the date of this paper. Without expedited approval by TDI, this product will not be available by January 1, 1998, the effective date of the amendment.
How will a junior lien policy work?
A junior lien policy is requested and paid for by the lender before the title work is begun. The title company searches title for a time period sufficient to locate the deed into the party applying for the home equity loan. The title company will list the liens found since that date. The title company will identify any existing home equity liens and the date such liens were recorded. The title company will insure that the property is not subject to an agricultural based tax exemption. After the closing of the home equity loan, the lender should request and pay for a down date endorsement. The endorsement covers the period between the original policy and the filing of the lien.
What’s the price of a junior lien policy?
As currently proposed, the junior lien policy premium begins at $175.00 for a policy amounts up to $50,000. An additional premium of $10.00 per $10,000 of coverage is required. The maximum loan amount insurable under a junior lien policy is $150,000, bearing a premium of $275.00.
When may lender accept home equity loan applications?
The Texas Attorney General has ruled that lenders may accept home equity loan applications after November 5, 1997 but that loans may not be closed until after the 12 day waiting period. Then, the 3 day right to rescind must run before funding. The title company will not determine when a home equity loan may be closed, but will rely on the closing instructions of the lender as to when the home equity loan may close. A copy of the Attorney General’s press release follows:
| FOR IMMEDIATE RELEASE THURSDAY, NOVEMBER 6, 1997 MORALES SAYS LENDERS MAY ACCEPT HOME EQUITYLOAN APPLICATIONS BEFORE EFFECTIVE DATE OF LAW Texas Attorney General Dan Morales issued an opinion Thursday which allows consumers to apply for home equity loans before the constitutional amendment takes effect on January 1, 1998. However, the opinion says the amendment's 12-day waiting period would not be triggered until the law takes effect. "Provided applications are solicited, accepted, and processed in a manner that does not mislead or deceive consumers, we find no legal prohibition on such practices prior to the effective date of amendment," Morales said in the ruling. The opinion was requested by Rep. Kenny Marchant, chair of the Committee on Financial Institutions. Voters on Tuesday lifted the state's ban on home-equity lending with the passage of Proposition 8. But the constitutional amendment does not take effect until January 1, 1998. Marchant asked if, in the interim, lenders could advertise and process applications before the effective date. The amendment allows consumers to use their home as collateral in obtaining a home-equity loan. As a form of consumer protection, the amendment states that a lien created pursuant to a home-equity loan is unenforceable if the loan is closed before the 12th day after the date the consumer submits a loan application, or the date the lender provides the owner with certain written notice regarding the terms of the loan, whichever comes later. This provision does not become effective until January 1. In other words, consumers may submit applications before the effective date, but the waiting period cannot begin to run until the amendment takes effect. CONTACT: |
Can I use my home equity money for any use I choose?
Yes. Unlike previous failed versions of home equity lending, home equity loans can be used for any purpose.
YOU CAN BECOME A HOMEOWNER top
Realizing the American Dream
For most people, buying a home is one of the most important decisions of their lives. The decision is not usually an easy one. But, trends in home prices and mortgage rates, combined with the tax advantages of home ownership, make this an excellent time to turn the home of your dreams into a reality.
Buying vs. Renting
If you're thinking of buying a home, you've probably already asked yourself, "Can I afford to buy?" Another good question to ask is, "Can I afford to continue renting?"
Rental payments are gone, once you make them. But with each mortgage payment, you are "buying" something tangible, building up equity. The longer you own your own home, the larger your equity.
Also, a home is an investment that helps you keep up with inflation. Although not all homes appreciate at the same rate and some years are better than others, real estate has historically kept pace with and usually appreciated faster than the rate of inflation.
Keep in mind, too, that through the years, your income most likely will increase faster than any increase in your mortgage payment. Rent payments, on the other hand, tend to increase right along with your paycheck.
Mortgage Rates
As a rule of thumb, a one point drop in mortgage rates means that half a million more families will qualify for affordable financing. Yours could be one of them!
Rates for conventional, 30-year fixed rate mortgages are now in a reasonable range. Increasingly popular alternate forms of financing may make your loan even more affordable. Your real estate broker can provide information on the types of mortgage plans available to you.
Homeowner Tax Advantages
When you're figuring out how much you can afford to commit to monthly mortgage payments, don't forget the tax advantages of home ownership.
Both property taxes and interest payments on a mortgage for an owner occupied home are currently tax-deductible. In the early years of a typical mortgage, all but a small percentage of each monthly payment is used to pay off the interest on the loan. This means that as a homeowner, your annual taxable income could be substantially reduced by deducting the payments you make on property taxes and yearly mortgage payments.
And, later on, should you decide to take advantage of the growing equity in your home by taking out a home equity loan, the interest on up to $100,000 of home equity indebtedness is tax deductible.
Home Value Appreciation
Additional tax advantages relate to home value appreciation. When a home is sold, and your equity in the property is $500,000 or less, then it is tax free if you are married; and if you are single it is $250,000. You will probably discover that you are closer to home ownership than you realized. And that, in fact, this is the time you've been waiting for. Buying a home is probably one of the biggest investments you'll ever make. Your local real estate professional has the experience and expertise to help you find and purchase the home of your dreams.
WHAT IS TITLE INSURANCE? top
Is there only one type of Title Insurance Policy?
No. The most often requested policies are:
Owners Title Policy: Protects the owner of the property while he is the owner and after the property is sold.
Mortgagee Title Policy: Protects lender from loss if it is determined that its lien is not valid or is inferior to another lien not shown as an exception to coverage on the policy.
Leasehold Title Policy: Insures against losses a tenant may suffer in the event the landlord does not own the property.
What is the amount of coverage?
Owners Title Policy - The policy will be issued in the amount of the current sales price. If there is no sale, the policy must be issued for the fair market value of the property.
Mortgagee Title Policy - The policy will be issued in an amount equal to the principal amount of the new loan.
Leasehold Title Policy - The policy will be issued in an amount equal to one of the following
- The total amount of rentals payable under the lease contract, or
- The value of the land and any existing improvements, or
- The value of the land and any existing improvements and the costs of improvements immediately contemplated to be built on the property.
Is Title Insurance just like other insurance?
No. Title Insurance insures against events that happened in the past that affect title to the property. Other types of insurance protect against events in the future.
How does a title company determine if it will insure the property?
Before issuing a title policy a search is made in the county real property records. This search is done by using the company abstract plant which maintains references to deeds, mortgages, liens, deaths, divorces, etc. which might affect the property.
These instruments are examined by the title company.
The results of the examination determine whether the title company will issue a policy and what exceptions to coverage will be taken in the policy.
Can one get title insurance on any property?
No. Title insurance is not intended for titles known to be defective.
Can a defective title be cured?
Sometimes. Depending on the nature of the title defects, they may be corrected with the assistance of an attorney of the seller’s choice.
Correction methods include affidavits, correction deeds and other documents. Court action may be necessary.
Many times the commitment for title insurance will list what items or actions would be necessary to remove the matter in question as an exception to coverage.
The title company does not cure bad titles or write legal papers. Documents required by the title company are not meant to cure a title defect, they are required to satisfy the title company that the property is insurable.
Why buy a title policy if an attorney has carefully searched the records and title is found to be good?
There are many hidden defects which may affect title to real estate. Some examples are:
- Forgeries
- Frauds
- False Representation
- Lost Wills
- Mistakes in Descriptions
- Undisclosed heirs
- Clerical Errors
- Illegal Trusts
Defects may not appear in the records and may not be picked up by even the most thorough search.
Can you afford title insurance?
Yes. There is a one time premium for coverage. There are no annual renewals. Compared to the cost of a loss, the expense of the premium is a bargain.
TITLE INSURANCE RATES ARE FIXED BY THE TEXAS DEPARTMENT OF INSURANCE.
This information is provided to help you understand title insurance. For exact coverage offered, you must rely on your policy.
WHAT'S IN A TITLE SEARCH? top
You've decided to purchase a home and hope to take possession as soon as possible. The terms have been agreed upon and all the financial arrangements have been made. But there's one important detail remaining. Before the transaction can close, a title search must be made.
The most accurate description of title is a bundle of rights in real property. A title search is the process of determining from the public record just what these rights are and who owns them.A title search is a means of determining 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 (title) that he or she is paying for.
The search process can be undertaken by the title company in those jurisdictions where the company maintains offices. In some areas, however, searches are made only by practicing attorneys. However the search is performed, in most real estate transactions today a title insurance policy is purchased to assure the buyer that he or she has purchased a valid title.
In those transactions where title insurance is involved, the title company must determine insurability of the title as part of the search process. This leads to the issuance of a title policy, which insures the existence or non-existence of rights to the property.
The title insurance company will, at its own expense, defend the title and will pay losses within the coverage of the policy if they occur.
But what exactly, is involved in a title search? The Chicago Title and Trust Family of Companies provides the following step-by-step review:
Chain of Title
This is simply a history of the ownership of a particular piece of property, telling 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 title companies. There are great varieties of such plants: index cards, punch cards, tract books, even sophisticated computerized plants. However, they all contain essentially the same information from which the history of the title may be secured.Tax Search
This is a search to determine the present status of general real estate taxes against the property. The tax search will reveal if taxes are current or whether any taxes are past due and unpaid from previous years. In addition, the tax search will indicate the existence of any special assessments against the land and, if so, whether or not these assessments are current or past due.A due and unpaid tax or special assessment is a prior lien or claim on the property above all others. 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. A tax search reveals the status of the taxes. Title insurance protects the buyer against loss from unpaid and past due taxes and assessments.
Report on Possession
In many places where it operates, Reunion Title sends 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.The purpose of this is to supplement the information learned from the title search. In the eyes of the law, any buyer of real estate is assumed to have notice of all matters properly shown in the public records as to that real estate as well as any information that an actual inspection may reveal.
If the inspector detects an unrecorded easement or other evidence of outstanding rights that could affect the owner's title and possibly the value and intended use, the company tells the buyer of these things before he or she closes the purchase. Those matters must then either be disposed of or shown as exceptions in the title insurance policy. Sometimes when an acceptable survey and appropriate affidavits are received, an inspection will not be made.
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.
Rights established by judgment decrees, unpaid federal income taxes, and mechanic's liens all may be prior claims on the property, ahead of the buyer's or lender's rights. If a judgment is discovered that constitutes a defect in the title, it is pointed out, and the seller must then eliminate it before the title of the new buyer can be insured free and clear of that judgment.
Commitment
When these searches have been completed, the title company 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.The mortgage lender is as concerned as the buyer about the quality of the title because the property is to be security for the new mortgage loan. The mortgage lender requires assurance that it has a valid first (or another acceptable priority) mortgage lien on the property. This is not only common sense, but generally is a legal requirement of regulated mortgage lenders.
The lender's title insurance, however, doesn't protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the lender are very different. The provisions of a lender's title insurance policy are very different from those of a buyer's policy, so the buyer should obtain his own policy, often issued simultaneously with the lender's policy.
WHY DO I NEED TITLE INSURANCE? top
Many title problems can arise to cause the complete or partial loss of your home or business property.
WON’T A SEARCH OF TITLE KEEP PROBLEMS FROM ARISING?
Even the most careful search of the public records will not find every title problem. Because some problems are hidden, your title may appear to be perfect but in fact there may be a problem that is a land mine waiting to explode.
ARE ALL MY POSSIBLE LOSSES COVERED BY AN OWNER POLICY OF TITLE INSURANCE?
No, owner’s title insurance protects you against financial loss caused by covered title risks. The title insurer, without expense to you, will defend you against an attack on the title to your property as insured. If the attack is successful, the title insurer will indemnify you against the defined financial loss up to the policy limit.
DO I PAY ANNUAL PREMIUMS:
A small, one-time premium provides you with this valuable protection.
WHAT ARE SOME EXAMPLES OF PROBLEMS TITLE INSURANCE PROTECTS AGAINST?
To give you an idea of the types of title problems that may occur, we have compiled this list of "Land Mines" that could result in partial or complete loss of your property or an expensive lawsuit.
"LAND MINES"
- Documents executed under duress.
- Defective acknowledgments.
- Deeds by minors.
- Inadequate legal descriptions.
- Easements established through continued use but not discovered by a survey or in the public record.
- Mistakes in recording legal documents.
- Mistaken reports furnished from taxing authorities.
- Misinterpretation of wills.
- Deed of community property recited to be separate property.
- Errors in tax records. (For example, listing payment against wrong property account.)
- Birth or adoption of children after date of will.
- Falsification of records.
- Undisclosed or missing heirs.
- Errors in indexing of legal documents by the County.
- Surviving children omitted from a will.
- Deeds to or from defunct corporations.
- Martial rights of spouse allegedly, but not legally, divorced.
- Instruments executed under fabricated or expired powers of attorney
- Forged deeds, releases, etc.
- Deeds by persons supposedly single but secretly married.
- Deeds from persons not competent to handle their affairs.
A TITLE INSURANCE POLICY IS A CONTRACT BETWEEN YOU AND US INSURING YOU AGAINST LOSS IN THE EVENT A TITLE DEFECT OCCURS RESULTING FROM A COVERED RISK.
WHAT HAPPENS IN ESCROW? top
What is an Escrow and Why is it Needed?
An escrow is an arrangement in which a disinterested 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 and selling 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 requirements. 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.
Who May Hold Escrows
The escrow holder is a disinterested third party.There are two important reasons for selecting an established, independent escrow firm, an attorney, or an escrow officer with a title insurance company. One is that real estate transactions require a tremendous amount of technical experience and knowledge to proceed smoothly. The other is that the escrow holder will generally be responsible for safeguarding and properly distributing the purchase price.
Escrow officers with established firms generally are experienced and trained in real estate procedures, title insurance, taxes, deeds and insurance.
Impartiality
An escrow officer must remain completely impartial throughout the entire escrow process. He or she will normally adopt a courteous but rather formal manner when dealing with parties to the escrow, keeping conversation to the matters at hand in the escrow. This formal behavior is meant for the benefit of all concerned, since the escrow officer must follow the instructions of both parties without bias.Escrow Instructions
Escrow instructions are written documents, signed by the parties giving them, which direct the escrow officer in the specific steps to be completed so the escrow can be closed.Typical instructions would include the following:
The method by which the escrow holder is to receive and hold the purchase price to be paid by the buyer.
The conditions under which a lapse of time or breach of purchase contract provision will terminate the escrow without a closing.
The instruction and authorization to the escrow holder to disburse funds for recording fees, title insurance policy, real estate commissions and any other closing costs per closing statements.
Instructions as to the proration of insurance and taxes.
Instruction to the escrow holder on the payment of prior liens and charges against the property and distribution of the net sale proceeds.
Since the escrow holder can only follow the instructions as stated, and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.
What Each Party Does in the Escrow Process
The Seller
Deposits the executed deed to the buyer with the escrow holder.
Deposits evidence of pest inspection and any required repair work.
Deposits other required documents such as tax receipts, addresses of mortgage holders, insurance policies, equipment warranties or home warranty contracts, etc.
The Buyer
Deposits the funds required, in addition to any borrowed funds, to pay the purchase price with the escrow holder.
Deposits funds sufficient for home and title insurance.
Arranges for any borrowed funds to be delivered to the escrow holder.
Deposits any deed of trust or mortgages necessary to secure loans.
Approves any inspection reports, title insurance commitments, etc. called for by the purchase and sale agreements.
Fulfills any other conditions specified in the escrow instructions.
The Lender (if applicable)
Deposits proceeds of the loan to the purchaser.
Directs the escrow holder on the conditions under which the loan funds may be used.
The Escrow Holder
Opens the order for title insurance.
Obtains approvals from the buyer on title insurance report, pest and other inspections.
Receives funds from the buyer and/or any lender.
Prorates insurance, taxes, rents, etc.
Disburses funds for title insurance, recordation fees, real estate commissions, lien clearance, etc.
Prepares a final closing statement for each party indicating amounts to be disbursed for services and any further amounts necessary to close escrow.
Records deed and loan documents, and delivers the deed to the buyer, loan documents to the lender and funds to the seller, thereby closing the escrow.
Closing the Escrow
Once all the terms and conditions of the instructions of both parties have been fulfilled, and all closing conditions satisfied, the escrow is closed and the safe and accurate transfer of property and money has been accomplished.In Summary
The escrow process was developed to help facilitate the sale or purchase of your home. The escrow holder accomplishes this by:Acting as the impartial escrow agent of documents and funds.
Processing and coordinating the flow of documents and funds.
Keeping all parties informed of progress on the escrow.
Responding to the lender's requirements.
Securing a title insurance policy.
Obtaining approvals of reports and documents from the parties as required.
Prorating and adjusting insurance, taxes, rents, etc.
Recording the deed and loan documents.
Maintaining security and accountability of monies owed and owing.
It's Not Always This Simple
The examples and explanations described here are designed to acquaint you with the escrow process and are based on relatively simple escrows. Every escrow is unique and most are more complex than explained here. If you have questions about the escrow process, we suggest you contact an escrow officer or attorney at Reunion Title to obtain detailed advice and further explanation.WHAT KIND OF TITLE INSURANCE? top
PROTECTION IS AVAILABLE FOR TENANTS AND THEIR LEADERS?LEASEHOLD ENDORSEMENTS
An available but often overlooked title insurance coverage is protection for tenants and their lenders. This coverage is available through special endorsements to both the Owner Policy of Title Insurance and the Mortgagee Policy of Title Insurance.
BUT MY LANDLORD HAS AN OWNERS TITLE POLICY OF TITLE INSURANCE...
This may be true, but the title insurance protection applies to the named insured - the owner - not to his tenants. In the case of a covered title defect serious enough to cause you to be evicted from all or part of the leased premises, your only remedies would be a lawsuit under the lease or expensive business interruption insurance. Also, a lender to a tenant for the tenant’s improvements would have a lien on property to which title may have been lost.
WHAT COVERAGE DO I HAVE
UNDER A LEASEHOLD POLICY?The leasehold policy is a standard owner or lender policy to which an endorsement covering items of loss not covered by the standard policy is added. Subject to policy provisions, losses covered up to the policy limit may include the following:
- The reasonable cost of removing and relocating personal property that you have the right to remove under the terms of your lease, the cost to move the personal property an initial 100 miles, and the cost of repairing any property damage in the move.
Personal property means inventory and fixtures.- Rent payable to the person having title superior to the landlord.
- Rent which the tenant is liable to pay to the landlord after the eviction.
- The fair market value of any sublease.
- Damages the insured tenant is obligated to pay a sublessee.
HOW IS THE VALUE OF MY LEASE AND INTEREST DETERMINED?
The value of a leasehold interest is the difference between the remaining rent to be paid and the present worth of the excess of the fair market rental, without regard for the title defect, for the remainder of the lease term, and all valid renewal options.
WHO PAYS FOR THE
TITLE INSURANCE POLICY?Customarily the insured pays for owner policy coverage; however, the payment of the premium is a negotiable matter. A borrower is usually required to provide the mortgagee policy to the lender as a part of the loan agreement.
Remember, your lease is only as good as your landlord’s ownership of the property. The landlord’s title policy does not protect you, your property, or your lender. In the case of a title defect serious enough to cause you to be evicted from all or part of the leased premises, a leasehold policy will help move you to a new location, help pay your rent at a new location, and protect you if you have subleased the property.
A TITLE INSURANCE POLICY IS A CONTRACT BETWEEN YOU AND THE UNDERWRITER INSURING YOU AGAINST LOSS IN THE EVENT A TITLE DEFECT OCCURS RESULTING FROM A COVERED RISK.
WHAT IS THE PRICE FOR
LEASEHOLD COVERAGE?In Texas, only the basic premium rate set by the Texas Department of Insurance is charged. There is no extra charge for the leasehold endorsement. A leasehold mortgagee policy can be issued simultaneously with the leasehold owner policy for a nominal charge. If an owner policy of title insurance and a leasehold owner policy are issued simultaneously, then the leasehold policy is issued at 30% of the premium for the owner policy.
HOW YOU CAN HELP YOUR BROKER GET THE MOST FOR YOUR HOUSE---FAST?? top
FIRST IMPRESSIONS - SELL HOMES
Other than the price, the first impression your home makes is the most important attribute of a sale. When you place your home for sale, you will make more money if it looks its best.
Look at your house as though you are seeing it for the first time. See its good points and its not-so-good points. Take steps to add to the good points and to fix the not-so-good points,
The list below will assist you in reviewing the attributes of your home so that it will show to its best advantage.
HOW TO START
Before you spend any significant amount of money, consult your broker. The broker can tell you whether the expense will pay off in an increased sales price or a decreased selling time.
Exterior
- Mow the lawn
- Trim trees and shrubs
- Weed flower beds and yard
- Clean or repair walks, driveway, steps and porches
- Paint trim and front of house
- Clean and repair roof, gutters, and downspouts
- Paint front door, mailbox, and back door
- Repair or replace storm doors
- Clean and repair screens and storm windows
- Clean, paint, repair garage - throw away anything you don’t intend to keep
Interior
- Paint, if necessary
- Clean windows
- Clean and polish floors
- Make sure all light bulbs are working
- Make sure all doors and windows are working properly
- Make sure light switches work
- Repair and paint cracked walls and ceilings
- Fix dripping faucets
- Clear clogged drains
- Clean fireplace
- Straighten all closets
- Use potpourri or other pleasant smells
- Vacuum or shampoo rugs as needed
- Clean heating and air conditioning system, furnace, boiler, etc.
- Throw away what you’re not going to move
Kitchen
- Paint or polish cabinets
- Clean ventilating hood and fan
- Repair, clean and wax floor
- Clear off counter tops
- Make sure drawers work properly
- Put appliances out of sight: stack items neatly in cabinets
Bedrooms
- Make beds
- Vacuum floor
Living Room/Den
- Play "Middle or the road" music in the background
- Stack newspapers/magazines
- Clean and dust shelves and appliances, TV, and stereo
Dining Room
- Polish furniture
Laundry Area
- Remove hanging clothes
- Put away supplies
- Clean/polish appliances
DON’T TAKE IT PERSONALLY
If you are home when a prospect arrives, relax, stay out of the way, and let your broker show your home.
Answer questions truthfully. If you have helped your home make a good first impression by carefully going over this list, your home will sell itself.
SELLING THIS HOME,
BUYING ANOTHERIf you’re selling this home, you’re probably buying another one.
In order to protect your investment in your new home, you should protect yourself with an owner policy of title insurance. Claims against previous owners can be filed against the property and the current owner. That means you, the new buyer.
Title problems such as fraud, forgery, missing heirs, old liens and errors in the records can endanger your investment or even cause you to lose your home.
An owner’s title insurance policy from Reunion Title can insure you against covered risks.
For only a small, one-time premium, the insurance coverage lasts as long as you or your heirs have an interest in the property or you have liability under warranties you may give.
A TITLE INSURANCE POLICY IS A CONTRACT BETWEEN YOU AND THE UNDERWRITER INSURING YOU AGAINST LOSS IN THE EVENT A TITLE DEFECT OCCURS RESULTING FROM A COVERED RISK
HOW DO REAL ESTATE PROFESSIONALS HELP SELLERS MAKE MORE MONEY? top
PRICING
A homeowner is usually not the best judge of the value of his or her home. There are too many emotional ties to the home for the owner to be unbiased. Also the owner knows the amount he needs or wants from the sale and may not be objective.
Real estate brokers have the most current information about the marketplace. This information allows them to know what properties similar to yours are selling for.
If your estimate of value is too high, some prospective buyers will consider it out of their reach. Also, frequent price reductions may cause buyers to wonder if something is wrong with the home.
If your estimate of value is too low, you will lose money you could have had. A price which is too low may also be discouraging to buyers who are suspicious of bargain deals.
Real estate brokers will aid you in appraising your home by pointing out that the home is in a favorable location, convenient to transportation and shopping, or has a popular design or builder.
FINDING A BUYER
A "For Sale by Owner" sign in your yard can have implications you may not have considered. Your doorbell may ring at any time of the day or night. You may lose a sale if you’re not home. Strangers - some just simply curious - will want to look at your home. People may ask you many personal questions about financing, settlement, reasons for selling and so forth.
A real estate broker will screen prospective buyers in order to show your home to interested buyers with the ability to buy. Your home will be shown with advance notice to you. Plus, brokers have clients who are looking for homes like yours.
Advertising your home is an art. Brokers know where to advertise, how often to advertise and how to word advertisements for effect. This knowledge can sell your home more quickly.
Real estate brokers can continue selling your home, even if you are at work or out of town, by using lock boxes and other proven techniques.
MAKING THE DEAL
Buyers usually offer less than your asking price. Can you objectively evaluate the offer? Unless you have bought and sold several homes, you may need help in dealing with contracts..
Your broker knows how to handle counter-offers, prices, cash down payments, settlement dates, financing, and other important details.
Brokers have done it before, so they know what to do. Your broker will either have an answer or know where to find it.
When it comes to real estate commissions, it is important to remember this - the more money your broker earned, the more money you made on the sale.
BUYING REAL ESTATE
When buying or selling real estate, brokers will probably recommend the purchase of an owner policy of title insurance, a contract that protects you against covered title risks, including liens, defects or encumbrances of the past and to insure that your home is yours. An owner’s title insurance policy may protect you against actual financial loss up to the policy limit.
A TITLE INSURANCE POLICY IS A CONTRACT BETWEEN YOU AND THE UNDERWRITER INSURING YOU AGAINST LOSS IN THE EVENT A TITLE DEFECT OCCURS RESULTING FROM A COVERED RISK.
Many times, people try to save money by selling their homes without the aid of a real estate broker. "For Sale by Owner" often appears to be a good way to save money, but instead of saving, selling your home yourself could cost you time and money.
Real estate brokers can save you valuable time by selling your home faster and can help you get the most money for your property.
They can also help you attend to some of the many details you might not have considered. It’s their job, and they do it every day.
THE WAY TO EASIER SETTLEMENTS top
WHAT IS A SETTLEMENT?
A SETTLEMENT:
- Protects the parties to the transaction by having a neutral party seeing that their agreement is implemented.
- Allows the seller to use part of the purchase money to pay his liens and to pass title to the purchaser subject only to the liens agreed to in the sales agreement.
- Aids in the settlement of multiple property transactions.
- Aids in a transaction involving a sale and simultaneous release.
- Enables the real estate broker to devote more time to selling other properties by turning over to the settlement agent the time-consuming details of settlement.
- Inspires confidence in buyers and sellers of real estate that the appropriate documents have been signed and recorded and that taxes and prior liens against the property have been paid.
- Assures lenders that the disbursement of their loan proceeds has been property handled.
WAYS TO SIMPLIFY SETTLEMENTS:
WHAT THINGS DOES THE SETTLEMENT AGENT NEED FROM THE SELLER BEFORE CLOSING?
1. After discussing the requirements of the commitment for title insurance with the settlement agent, the seller or his attorney should make the following items available to the settlement agent:
- Deed, other required title documents and curative documents. Please note that title companies do not prepare legal documents that are used for the parties’ benefit (such as deeds, releases, or mortgage instruments), nor are title insurance agents required to cure title defects.
- Hazard insurance policies with proper endorsements and assignments attached (when existing policies are to be assigned) as required by the lender.
- Payoff statements from the holder of existing liens.
- All unrecorded releases of liens or discharges of mortgages in his possession.
- The most current paid real estate tax statements and receipts.
- A statement showing the amount of real estate commissions to be paid out of the settlement and to whom payable.
- An agreed division of charges for title premiums, recording fees and settlement charges.
- Copy of the earnest money contract, fully executed and dated; also, any bill of sale covering personal property or required property condition disclosures.
WHAT THINGS DOES THE SETTLEMENT AGENT NEED FROM THE BUYER BEFORE CLOSING?
2. The Purchaser and his attorney should make the following available to the settlement agent:
- Required funds in the form of a certified check, cashier’s check or wire transfer instructions.
- Required hazard insurance policies (when not taking over existing policies).
- Other documents required by the earnest money contract.
- Who the Lender is.
WHAT THINGS DOES THE SETTLEMENT AGENT NEED FROM THE LENDER BEFORE CLOSING?
3. The Lender should provide to the settlement agent written closing instructions describing the lender’s requirements for insurance in connection with the closing and funding, including:
- Hazard insurance requirements.
- Special provisions required to be in mortgagee policies.
- Payment of service charges and mortgage costs.
- Any other matters relating to the settlement.
WHAT’S THE DUTY OF THE SETTLEMENT AGENT TO THE PARTIES?
A settlement or escrow agent is a neutral third party who disburses funds in accordance with the agreement of the parties.
WHY USE REUNION TITLE'S INSURANCE AGENTS?
Many attorneys, lenders, developers, home builders and real estate brokers close their real estate transactions through Reunion Title. The simple reason for their decision: It’s easier for them and safer for you.
A TITLE INSURANCE POLICY IS A CONTRACT BETWEEN YOU AND THE UNDERWRITER INSURING YOU AGAINST LOSS IN THE EVENT A TITLE DEFECT OCCURS RESULTING FROM A COVERED RISK.
TEXAS AD VALOREM TAXES top
AD VALOREM TAXES ARE PROPERTY TAXES.ARE AD VALOREM TAX LIENS PRIORITY LIENS
OVER ALL VOLUNTARY LIENS IN TEXAS?Yes. Property taxes (based on the value of the property) are required by law to be assessed and available on the tax rolls by October 1 of each year.
Realistically the tax rolls are usually not available on October 1, but are available in the months of October and November.
WHAT TAX EXEMPTIONS ARE AVAILABLE?
There are several exemptions available to property owners in the State of Texas:
- Homestead
- Over 65
- Disabled
- Agricultural
You will need to check with each taxing authority regarding these exemptions.
WHEN ARE TAXES PAYABLE?
Taxes become a lien on January 1 of each year. However, they cannot be paid until October 1. Some taxing authorities give a varied percentage discount if paid early (between October and January). Taxes become delinquent after January 31, of the next year.
WHEN IS THE TAX LIEN IMPOSED?
Even though the taxes for the year are not assessed and payable until near the end of the year, the law automatically imposes a superior lien against all real property on January 1 of every year to secure payment of the taxes for that year.
The superior lien being applied January of each year requires the prorating or apportioning of taxes between seller and buyer, if a sale takes place between January and October.
HOW ARE TAXES PRORATED AT CLOSING?
Prorations at the time of closing the sale allow the seller to give the buyer that portion of the taxes that the seller is liable for (from the first of the year) so that when the taxes are payable in the fall of the year the buyer or his lender will have all the funds required to pay the taxes for the whole year.
PROPERTY FACTS top
WHAT IS THE SIGNIFICANCE OF A TEXAS HOMESTEADHomestead essentially means a protection afforded the owner of a primary residence, business or lived on rural property, which prevents the forced sale of the property to satisfy debts of the owner.
HOW MUCH OF MY PROPERTY IS CONSIDERED HOMESTEAD
The homestead protection is limited to ten acres in an urban area and 200 acres in a rural area (100 acres if single). You may have both residential and a business homestead in an urban area and the one acre can be an accumulation of both. You cannot have an urban and a rural homestead simultaneously.
CAN I BORROW AGAINST THE HOMESTEAD
You can only borrow against your homestead and create a valid lien which can be foreclosed against the homestead for:
- Purchase Money
- Home Improvements Loan
- Payment of Taxes
- Owelty Liens
- Federal Tax Liens
- Home Equity Loan
WHAT DOCUMENTS ARE REQUIRED TO IMPROVE MY HOMESTEAD?
If you wish to borrow money to improve, repair, or add-on to your homestead, you must execute (both husband and wife) a Builder’s and Mechanic’s Lien Contract with the contractor who will provide the work and supplies prior to any work being done and the instrument must be recorded at the County Clerk’s office.
WHAT IS COMMUNITY PROPERTY
Community property means if you buy property while married, it will be presumed to be jointly owned by you and your spouse. However, there are ways separate property can be acquired during marriage.
WHAT IS SEPARATE PROPERTY
Separate property is property acquired before marriage, or acquired during marriage by gift or inheritance.
THE HOUSE HUNTER'S SCORECARD top
Print This Out and Take It Along With You
Nothing's quite so frustrating as forgetting why you liked two or three particular homes after weeks of looking. With this scorecard, you can keep a record for yourself.Not only does this list include most of the features you'll be needing in a home, it takes into account the importance of the surrounding community.
Maybe even more important, it allows you to set up a priority list ahead of time, a ranking order of features from the most vital to insignificant. Since most home purchases are compromises, this should help make your decision easier.
The priority list can also help a Realtor get a better picture of what you are looking for in a house to select those houses available that best meet your requirements.
When you are visiting different homes, there's no need to feel embarrassed about pulling out this check list and making notes. After all, you have a big decision to make, and it behooves you to take every precaution.
Selecting Your Title Insurer
You'll want to protect the title to your property with title insurance from the Reunion Title, the foremost name in title insurance. You want to be sure that you have a good title, free and clear of any claim which might possibly affect your ownership in the future.
About the House: Priority House A House B House C Asking price Real estate taxes Water bill Heating bill Electric bill Age of house One-story Two-story Wood frame
About the House: Priority House A House B House C Brick and wood frame Aluminum siding Overall exterior condition Storm windows Garage (note capacity) Gas heat Electric heat Hot-water heat Age of heating plant Central air cond./age Number of bedrooms Living room Separate dining room Kitchen eating area Number of bathrooms Closets Refrigerator Cooking stove Disposal Dishwasher Clothes washer/dryer Laundry space Adequate water heater Basement storage area
About the House: Priority House A House B House C Finished basement Attic storage area Finished attic Number of fireplaces Drapes Carpeting Modern electrical wiring Sump pump/drainage Overhead sewer system Backyard patio Fence on lot lines Pleasing landscaping
The House Is Near: House A House B House C Public transportation
(within walking distance)Thoroughfares or expressways
(short driving time)Convenience shopping Schools which the children will attend
(check with school officials)Parks
The House is X Minutes From: House A House B House C Work Downtown Convenience shopping Elementary school High School Doctors Relatives House of worship
