Title and Escrow
Understanding Preliminary Reports
After months of searching, you’ve finally found it -- your perfect dream home. But is it perfect? Will you be purchasing more than just a beautiful home? Will you also be acquiring liens placed on the property by prior owners? Have documents been recorded that will restrict your use of the property?
The preliminary report will provide you with the opportunity, prior to purchase, to review matters affecting your property which will be excluded from coverage under your title insurance policy unless removed or eliminated before your purchase. To help you better understand this often bewildering subject, the Land Title Association has answered some of the questions most commonly asked about preliminary reports.
Understanding Preliminary Reports
After months of searching, you’ve finally found it -- your perfect dream home. But is it perfect? Will you be purchasing more than just a beautiful home? Will you also be acquiring liens placed on the property by prior owners? Have documents been recorded that will restrict your use of the property?
The preliminary report will provide you with the opportunity, prior to purchase, to review matters affecting your property which will be excluded from coverage under your title insurance policy unless removed or eliminated before your purchase. To help you better understand this often bewildering subject, the Land Title Association has answered some of the questions most commonly asked about preliminary reports.
01.
What is a
Preliminary Report?
A preliminary report is a report prepared prior to issuing a policy of title insurance that shows the ownership of a specific parcel of land, together with the liens and encumbrances thereon which will not be covered under a subsequent title insurance policy.
02.
What role does a Preliminary Report play in the real estate process?
A preliminary report contains the conditions under which the title company will issue a particular type of title insurance policy.
Thus, a preliminary report provides the opportunity to seek the removal of items referenced in the report which are objectionable to the buyer prior to purchase.
03.
When and how is the Preliminary Report produced?
Shortly after escrow is opened, an order will be placed with the title company which will then begin the process involved in producing the report.
This process calls for the assembly and review of certain recorded matters relative to both the property and the parties to the transaction.
04.
What should I look for when reading my Preliminary Report?
You will be interested, primarily, in the extent of your ownership rights.
The report will note in a statement of vesting the degree, quantity, nature and extent of the owner’s interest in the real property.
05.
Will the Preliminary Report disclose the complete condition of the title to a property?
No. It is important to note that the preliminary report is not a written representation as to the condition of title and may not list all liens, defects, and encumbrances affecting title to the land
06.
Is a Preliminary Report the same thing as title insurance?
Definitely not.
A preliminary report is an offer to insure, it is not a report of a complete history of recorded documents relating to the property.
These distinctions are important for the following reasons: first, no contract or liability exists until the title insurance policy is issued
07.
Can I be protected against title risks prior to the close of the real estate transaction?
Yes, you can. Title companies can protect your interest through the issuance of “binders” and “commitments”.
Discuss with your title insurer the best means to protect your interests.
08.
How do I go about clearing unwanted liens and encumb-
rances?
You will wish to carefully review the preliminary report. Should the title to the property be clouded, you and your agents will work with the seller and the seller’s agents to clear the unwanted liens and encumbrances prior to taking title.
09.
Who can I turn to for further information regarding Preliminary Reports?
Your real estate agent and your attorney, should you choose to use one, will help explain the preliminary report to you. Your escrow and title company can also be helpful sources.
10.
CONCLUSION
In a business which is directed at risk elimination, the efforts leading to the production of the preliminary report, which is designed to facilitate the issuance of a policy of title insurance, is perhaps the most important function undertaken.
Statements of Information
What’s in a name? When a title company seeks to uncover matters affecting title to real property, the answer is, “Quite a bit.” Statements of Information provide title companies with the information they need to distinguish the buyers and sellers of real property from others with similar names.
After identifying the true buyers and sellers, title companies may disregard the judgments, liens or other matters on the public records under similar names.
To help you better understand this sensitive subject, the Land Title Association has answered some of the questions most commonly asked about Statements of Information.
Statements of Information
What’s in a name? When a title company seeks to uncover matters affecting title to real property, the answer is, “Quite a bit.” Statements of Information provide title companies with the information they need to distinguish the buyers and sellers of real property from others with similar names.
After identifying the true buyers and sellers, title companies may disregard the judgments, liens or other matters on the public records under similar names.
To help you better understand this sensitive subject, the Land Title Association has answered some of the questions most commonly asked about Statements of Information.
01.
What is a Statement of Information?
A Statement of Information is a form routinely requested from the buyer, seller and borrower in a transaction where title insurance is sought. The completed form provides the title company with information needed to adequately examine documents so as to disregard matters which do not affect the property to be insured, matters which actually apply to some other person.
02.
What does a Statement of Information do?
Every day documents affecting real property--liens, court decrees, bankruptcies--are recorded.
Whenever a title company uncovers a recorded document in which the name is the same or similar to that of the buyer, seller or borrower in a title transaction, the title company must ask, “Does this document affect the parties we are insuring?
A properly completed Statement of Information will allow the title company to differentiate between parties with the same or similar names when searching documents recorded by name.
03.
What types of information are requested in a Statement of Information?
The information requested is personal in nature, but not unnecessarily so.
You, and your spouse if you are married, will be asked to provide full name, social security number, year of birth, birthplace, and information or citizenship.
Residence and employment information will be requested, as will information regarding previous marriages or registered domestic partnerships.
04.
Will the information I supply be kept confidential?
The information you supply is completely confidential and only for title company use in completing the search of records necessary before a policy of title insurance can be issued.
05.
What happens if a buyer, seller or borrower fails to provide the requested Statement of Information?
At best, failure to provide the requested Statement of Information will hinder the search and examination capabilities of the title company, causing delay in the production of your title policy.
At worst, failure to provide the information requested could prohibit the close of your escrow.
06.
Conclusion
Title companies make every attempt in issuing a policy of title insurance to identify known risks affecting your property and to efficiently and correctly transfer title so as to protect your interests as a homebuyer.
By properly completing a Statement of Information, you allow the title company to provide the service you need with the assurance of confidentiality.
Title Insurance When Refinancing Your Loan
Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the life of the loan, but you should also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection and other expenses.
Why do I need to purchase a new title insurance policy on a refinanced loan?
To the lender, a refinance loan is no different than any other home loan. So, your lender will want to insure that their new loan is protected by title insurance, just as the original lender required. Therefore, when you refinance you are buying a title policy to protect your lender. Why does a Lender need title insurance?
Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae.
Title Insurance When Refinancing Your Loan
Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the life of the loan, but you should also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection and other expenses.
Why do I need to purchase a new title insurance policy on a refinanced loan?
To the lender, a refinance loan is no different than any other home loan. So, your lender will want to insure that their new loan is protected by title insurance, just as the original lender required. Therefore, when you refinance you are buying a title policy to protect your lender. Why does a Lender need title insurance?
Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae.
01.
When I purchased my home, didn’t I also buy a lender’s policy?
Perhaps. Who pays for the lender’s policy on a purchase loan varies regionally and by the terms of individual contracts.
However, even if you did buy a lender’s policy when you purchased your home, the lender’s policy remains in force only during the life of the loan that was insured. If you refinance, the old loan is paid off (the “life” of the loan expires) and a new loan is issued for which the lender will require a new title insurance policy.
02.
What about my original title insurance policy?
When you bought your home, you purchased a Homeowners title policy. The Homeowners’ policy stays in force as long as you or your heirs own the home. When you refinance, your lender will often require that you purchase a new lender’s policy to protect their new security interest in the property. Thus, you are buying a policy to protect your lender, not a new Homeowner’s policy.
03.
What could possibly have happened since I purchased my home which warrants a new lender’s policy?
Since the time that the original loan was made, you may have taken out a second trust deed on the house or had mechanic’s liens, child support liens or legal judgments recorded against you - events that could result in serious financial losses to an unprotected lender. Regardless if it has been only 6 months or less since you purchased or refinanced your home, a myriad of title defects could have occurred.
04.
Are there any discounts available for title insurance on a refinance transaction?
Yes. Title companies offer a refinance transaction discount or a short-term rate. Discounts may also be available if you use the same lender for your refinance loan and your original loan. Be sure to ask your title company how they can save you money.
Title Insurance Requirements for Insuring Trusts
In today’s world of busy probate courts and exorbitant death taxes, the living trust has become a common manner of holding title to real property. The following may help you understand a few of the requirements of the title insurance industry if title to property is conveyed to the trustee of a living trust
What is a trust? An agreement between a trustor and trustee for the trustee to hold title to and administer designated assets of the trustor for the use and benefit of one or more beneficiaries. Can a trust itself acquire and convey interests in real property? No. The trust is an arrangement between a trustee and the trustor. Only the trustee, on behalf of the trust, may own and convey any interest in real property. The trustee may only exercise the powers granted in the trust. If there is more than one trustee, can just one sign? Maybe. The trust must specifically provide for less than all to sign. Can the trustee give someone a power-of-attorney? Only if the trust specifically provides for the appointment of an attorney-in-fact.
Title Insurance Requirements for Insuring Trusts
In today’s world of busy probate courts and exorbitant death taxes, the living trust has become a common manner of holding title to real property. The following may help you understand a few of the requirements of the title insurance industry if title to property is conveyed to the trustee of a living trust
What is a trust? An agreement between a trustor and trustee for the trustee to hold title to and administer designated assets of the trustor for the use and benefit of one or more beneficiaries. Can a trust itself acquire and convey interests in real property? No. The trust is an arrangement between a trustee and the trustor. Only the trustee, on behalf of the trust, may own and convey any interest in real property. The trustee may only exercise the powers granted in the trust. If there is more than one trustee, can just one sign? Maybe. The trust must specifically provide for less than all to sign. Can the trustee give someone a power-of-attorney? Only if the trust specifically provides for the appointment of an attorney-in-fact.
01.
What will the title company require if a trustee holds the title to the property which is part of the trust?
A certification of trust containing the following information:
Date of execution of the trust instrument,
Identity of the trustor and trustee,
Powers of the trustee,
Identity of person with power to revoke trust, if any,
Signature authority of the trustees,
Legal description of any interest in the property held by the trust, and
A statement that the trust has not been revoked, modified, or amended in any manner which would cause the certification to be incorrect and that the certification is being signed by all currently acting trustees of the trust
02.
My trust contains certain amounts of money to be given to various charities which is none of your business. Can I omit these pages?
Because many different provisions may be on the same page, the answer must be no -- but if the title company requires a copy of the trust, it may accept a copy with those amounts blacked out.
03.
What will the title company require if all the trustees have died or are unwilling to act?
If the trustor is not able to do so, or the trust provisions prohibit the trustor from appointing a new trustee, the court may do so.
04.
How does a notary acknowledge the signature of the trustee?
05.
Are there any limitations on what a trustee may do?
Yes, the trustee is limited principally and most importantly by the provisions of the trust and, thus, may only act within the terms of the trust. The probate code contains general powers which, unless limited by the trust agreement, are sufficient for title insurers to rely on for sale, conveyance, and refinance purposes.
06.
How would the deed to the trustee ordinarily be worded to transfer title to the trustee?
“John Doe and Mary Doe, as trustees of the Doe family trust, under declaration of trust dated January 1,1992.”
Title Insurance - Where Does Your Dollar Go?
Title Insurance: As a homebuyer, the term is probably familiar - but is it understood? What is your dollar actually paying for when you purchase a title policy? Title Insurers, unlike property or casualty insurance companies, operate under the theory of risk elimination. Title companies spend a high percentage of their operating income each year collecting, storing, maintaining and analyzing official records for information that affects title to real property. Their technical experts are trained to identify the rights others 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, the title company will proceed to clear those encumbrances which you do not wish to assume.
As in all competitive business environments, rates vary from company to company, so you should make comparisons before deciding on a particular title company. Your real estate professional can help you do this. In addition, there are many helpful customer services provided by title companies which you and your real estate professional may find helpful to your transaction.
Title Insurance - Where Does Your Dollar Go?
Title Insurance: As a homebuyer, the term is probably familiar - but is it understood? What is your dollar actually paying for when you purchase a title policy? Title Insurers, unlike property or casualty insurance companies, operate under the theory of risk elimination. Title companies spend a high percentage of their operating income each year collecting, storing, maintaining and analyzing official records for information that affects title to real property. Their technical experts are trained to identify the rights others 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, the title company will proceed to clear those encumbrances which you do not wish to assume.
As in all competitive business environments, rates vary from company to company, so you should make comparisons before deciding on a particular title company. Your real estate professional can help you do this. In addition, there are many helpful customer services provided by title companies which you and your real estate professional may find helpful to your transaction.
Understanding Title Insurance
What is title insurance? Newspapers refer to it in the weekly real estate sections and you hear about it in conversations with real estate brokers. If you’ve purchased a home you may be familiar with the benefits of title insurance. However, if this is your first home, you may wonder, “Why do I need yet another insurance policy?” While a number of issues can be raised by that question, we will start with a general answer. The purchase of a home is one of the most expensive and important purchases you will ever make. You and your mortgage lender will want to make sure the property is indeed yours and that no one else has any lien, claim or encumbrance on your property. The Land Title Association, in the following pages, answers some questions frequently asked about an often misunderstood line of insurance - title insurance. What is the difference between title insurance and casualty insurance Title insurers work to identify and eliminate risk before issuing a title insurance policy. Casualty insurers assume risks.
Understanding Title Insurance
What is title insurance? Newspapers refer to it in the weekly real estate sections and you hear about it in conversations with real estate brokers. If you’ve purchased a home you may be familiar with the benefits of title insurance. However, if this is your first home, you may wonder, “Why do I need yet another insurance policy?” While a number of issues can be raised by that question, we will start with a general answer. The purchase of a home is one of the most expensive and important purchases you will ever make. You and your mortgage lender will want to make sure the property is indeed yours and that no one else has any lien, claim or encumbrance on your property. The Land Title Association, in the following pages, answers some questions frequently asked about an often misunderstood line of insurance - title insurance. What is the difference between title insurance and casualty insurance Title insurers work to identify and eliminate risk before issuing a title insurance policy. Casualty insurers assume risks.
01.
Who needs title insurance?
Buyers and lenders in real estate transactions need title insurance. Both want to know that the property they are involved with is insured against certain title defects. Title companies provide this needed insurance coverage subject to the terms of the policy. The seller, buyer and lender all benefit from the insurance provided by title companies.
02.
What does title insurance insure?
Title insurance offers protection against claims resulting from various defects (as set out in the policy) which may exist in the title to a specific parcel of real property, effective on the issue date of the policy. For example, a person might claim to have a deed or lease giving them ownership or the right to possess your property.
03.
What types of policies are available?
Title companies routinely issue two types of policies: An “owner’s policy” which insures you, the Homebuyer, for as long as you and your heirs own the home; and a “lender’s” policy which insures the priority of the lender’s security interest over the claims that others may have in the property.
04.
What protection am I obtaining with my title policy?
A title insurance policy contains provisions for the payment of the legal fees in defense of a claim against your property which is covered under your policy. It also contains provisions for indemnification against losses which result from a covered claim. A premium is paid at the close of a transaction.
05.
What are my chances of ever using my title policy?
In essence, by acquiring your policy, you derive the important knowledge that recorded matters have been searched and examined so that title insurance covering your property can be issued. Because we are risk eliminators, the probability of exercising your right to make a claim is very low.
06.
What if I am buying property from someone I know?
You may not know the owner as well as you think you do. People undergo changes in their personal lives that may affect title to their property. People get divorced, change their wills, engage in transactions that limit the use of the property and have liens and judgments placed against them personally for various reasons.
Creative Financing
Creative financing: You’ve heard of it, and, as a seller, the idea sounds pretty attractive. But, do you know everything you need to know about carrying back a second; essentially, about becoming a lender? You better know the same things that financial institutions know - you better know about lender’s title insurance.
It’s time to sell your $150,000 home, a home that you have owned for fifteen years, a home in which you have substantial equity. The loan terms call for a $20,000 down payment from your buyer, a new $100,000 loan from a local savings and loan, and for you, the seller, to carry back a note for the remaining $30,000. Will you, the seller, need title insurance? Yes, you will. Everyone who retains an interest in the property needs title insurance. When you took on the role of lender, you retained a record title interest which you will want to protect for the term of the loan. But, why would you need lender’s title insurance when the repayment of your loan is assured by a lien in the form of a recorded deed of trust against the property? What could possibly go wrong?
Creative Financing
Creative financing: You’ve heard of it, and, as a seller, the idea sounds pretty attractive. But, do you know everything you need to know about carrying back a second; essentially, about becoming a lender? You better know the same things that financial institutions know - you better know about lender’s title insurance.
It’s time to sell your $150,000 home, a home that you have owned for fifteen years, a home in which you have substantial equity. The loan terms call for a $20,000 down payment from your buyer, a new $100,000 loan from a local savings and loan, and for you, the seller, to carry back a note for the remaining $30,000. Will you, the seller, need title insurance? Yes, you will. Everyone who retains an interest in the property needs title insurance. When you took on the role of lender, you retained a record title interest which you will want to protect for the term of the loan. But, why would you need lender’s title insurance when the repayment of your loan is assured by a lien in the form of a recorded deed of trust against the property? What could possibly go wrong?
Closing and Title Costs
It’s the big day. The day you go to the title or escrow company, sign your name on the dotted line, hand over a check and prepare to take ownership of your new home. It’s also the day that you and the seller will pay “closing” or settlement costs, an accumulation of separate charges paid to different entities for the professional services associated with the buying and selling of real property.
It’s too often a day filled with uncertainty and stress To help you better understand this confusing subject, the Land Title Association has answered some of the questions most commonly asked about title, closing and closing costs. 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 home owner’s insurance, title insurance premiums, pest inspections and the like. 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 Procedures Act after you submit your loan application.
Closing and Title Costs
It’s the big day. The day you go to the title or escrow company, sign your name on the dotted line, hand over a check and prepare to take ownership of your new home. It’s also the day that you and the seller will pay “closing” or settlement costs, an accumulation of separate charges paid to different entities for the professional services associated with the buying and selling of real property.
It’s too often a day filled with uncertainty and stress To help you better understand this confusing subject, the Land Title Association has answered some of the questions most commonly asked about title, closing and closing costs. 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 home owner’s insurance, title insurance premiums, pest inspections and the like. 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 Procedures Act after you submit your loan application.
01.
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 awaiting payment upon closing. The title or escrow company will disburse money to those parties, pursuant to the escrow instructions, when funds are available.
02.
Will I be allowed to write a personal check to cover my closing cost?
Your closing funds should be in the form of a cashier’s check, issued by an institution from the state of your purchase, made payable to the title company or escrow office in the amount requested.
A personal check may delay the closing or may be unacceptable to the title or escrow company.
03.
How much can I expect to pay for Title Insurance?
This point is often misunderstood. Although the title company or escrow office usually serves as a meeting ground for closing the sale, only a small percentage of total closing fees are actually for title insurance protection.
04.
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.
05.
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.
06.
Who can I look for straight answers on Title, Closing, and closing costs?
Title or escrow company personnel are available to review and explain your title policy and your closing statement.
Required Reporting to the I.R.S.
Sellers of real property will have certain information regarding the sale reported to the Internal Revenue Service. This required reporting is a consequence of the Tax Reform Act of 1986; it is intended to encourage taxpayer compliance and aid in audit and enforcement efforts by the I.R.S. To help you better understand this subject, the Land Title Association has answered some of the questions most commonly asked about Required Reporting to the I.R.S. Who is required to report to the I.R.S.? Sellers of real property, under guidelines established by the I.R.S., are required to have their gross proceeds from the sale reported on a Form 1099S. When a settlement agent is used, the I.R.S. makes this agent responsible for the delivery of the information on the Form 1099S. The settlement agent generally will be the escrow agent or title company; however, it may be an attorney, real estate broker or other person providing settlement services.
Required Reporting
to the I.R.S.
Sellers of real property will have certain information regarding the sale reported to the Internal Revenue Service. This required reporting is a consequence of the Tax Reform Act of 1986; it is intended to encourage taxpayer compliance and aid in audit and enforcement efforts by the I.R.S. To help you better understand this subject, the Land Title Association has answered some of the questions most commonly asked about Required Reporting to the I.R.S. Who is required to report to the I.R.S.? Sellers of real property, under guidelines established by the I.R.S., are required to have their gross proceeds from the sale reported on a Form 1099S. When a settlement agent is used, the I.R.S. makes this agent responsible for the delivery of the information on the Form 1099S. The settlement agent generally will be the escrow agent or title company; however, it may be an attorney, real estate broker or other person providing settlement services.
01.
What is an I.R.S. Form 1099S, and what will be reported?
In general, information required by the I.R.S. falls into the following categories:
The name, address and taxpayer ID number (social security or tax identification number) of the seller(s)
A general description of the property (in most cases an address)
The closing date of the transaction
The gross proceeds of the transaction (even though gross proceeds do not correspond to taxable income)
Any property involved as part of the transaction other than cash or cash equivalent
The name, address and taxpayer identification number of the settlement agent.
Real estate tax paid in advance that is allocable to the buyer.
02.
On what type of transactions is a Form 1099S required?
Currently, typical homeowner transactions covered include sales and exchanges of 1-4 family residential properties such as houses, townhouses, and condominiums. Also reportable are sales or exchanges of improved or unimproved land, commercial or industrial buildings, condominiums, stock in a cooperative housing corporation and mobile homes (manufactured homes) affixed to real property.
03.
What happens if the seller(s) refuses to provide the taxpayer identification number for the Form 1099S?
The settlement agent is required to request the transferor’s taxpayer identification number(s) (TIN(s)) before the time of closing. You may request a TIN on Form W-9 or use an alternative written request. The IRS has included sample wording of an alternative written request in the instructions for preparation of Form 1099S.
Should the seller fail to provide the identification number and certify its correctness, the settlement agent may choose to:
Delay the closing of the transactions until the information is furnished, or
Complete the transaction and report to the I.R.S. that an attempt was made to obtain the information from the seller.
04.
How is the sale reported when there is more than one seller involved or when multiple sellers do not own equal interests in the property?
How is the sale reported when there is more than one seller involved or when multiple sellers do not own equal interests in the property?
05.
Where can I go for further information on taxation of real property?
The I.R.S. provides free publications that explain the tax aspects of real estate transactions. You may wish to order:
Publication #523 “Tax Information on Selling Your Home”
Publication #530 “Tax Information for Home Owners”
Publication #544 “Sales and Other Dispositions of Assets”
Publication #551 “Basis of Assets”
The Functions of an Escrow
Buying or selling a home (or other piece of real property) usually involves the transfer of large sums of money. It is imperative that the transfer of these funds and related documents from one party to another be handled in a neutral, secure and knowledgeable manner. For the protection of buyer, seller and lender, the escrow process was developed.
As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.
The Functions
of an Escrow
Buying or selling a home (or other piece of real property) usually involves the transfer of large sums of money. It is imperative that the transfer of these funds and related documents from one party to another be handled in a neutral, secure and knowledgeable manner. For the protection of buyer, seller and lender, the escrow process was developed.
As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.
The Functions of an Escrow
01.
serves as the neutral “stakeholder” and the communications link to all parties in the transaction;
prepares escrow instructions;
requests a preliminary title search to determine the present condition of title to the property;
requests a beneficiary’s statement if debt or obligation is to be taken over by the buyer;
02.
receives purchase funds from the buyer;
prepares or secures the deed or other documents related to escrow;
prorates taxes, interest, insurance and rents according to instructions;
secures releases of all contingencies or other conditions as imposed on any particular escrow;
03.
records deeds and any other documents as instructed;
requests issuance of the title insurance policy;
closes escrow when all the instructions of buyer and seller have been carried out;
disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs;
04.
prepares final statements for the parties accounting for the disposition of all funds deposited in escrow (these are useful in the preparation of tax returns).
THE ESCROW HOLDER DOES NOT:
offer legal advice;
negotiate the transaction;
offer investment advice.
Why Do You Need Title Insurance?
It’s a term we hear and see frequently - we see reference to it in the Sunday real estate section, in advertisements and in conversations with real estate brokers. If you’ve purchased a home before, you’re probably familiar with the benefits and procedures of title insurance. But if this is your first home, you may wonder, “Why do I need another insurance policy? It’s just one more bill to pay.”
The answer is simple: The purchase of a home is most likely one of the most expensive and important purchases you will ever make.
You, and your mortgage lender, want to make sure that the property is indeed yours - lock, stock and barrel - and that no individual or government entity has any right, lien, claim to your property. Title insurance companies are in business to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly and that your interests as a homebuyer are protected to the maximum degree.
Why Do You Need Title Insurance?
It’s a term we hear and see frequently - we see reference to it in the Sunday real estate section, in advertisements and in conversations with real estate brokers. If you’ve purchased a home before, you’re probably familiar with the benefits and procedures of title insurance. But if this is your first home, you may wonder, “Why do I need another insurance policy? It’s just one more bill to pay.”
The answer is simple: The purchase of a home is most likely one of the most expensive and important purchases you will ever make.
You, and your mortgage lender, want to make sure that the property is indeed yours - lock, stock and barrel - and that no individual or government entity has any right, lien, claim to your property. Title insurance companies are in business to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly and that your interests as a homebuyer are protected to the maximum degree.
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WEICHERT, REALTORS® – Corwin & Associates
133 N. Seguin Avenue New Braunfels, TX 78130 Across from Courthouse, Downtown New Braunfels 830-632-5725
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Information last updated on 2025-05-19 06:30:16.
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