What is title insurance?
An insurance policy. Owner’s title insurance protects purchasers against title defects that may exist on the property. Lender’s or (Mortgagee) title insurance ensures the lender that no other mortgages, liens or judgments have priority over their mortgage.
Why do I need title insurance?
Title insurance covers you in case unforeseen problems come up that might infringe on your legal or actual access to your property, to your ability to buy the property, or to sell the property once you own it.
What types of claims or risks are covered by title insurance?
Standard coverage addresses such risks as:
- An improperly recorded deed
- Forgery and impersonation
- Lack of capacity, legal authority or competence of a party
- Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner)
- An undisclosed (but recorded) prior mortgage or lien
- An undisclosed (but recorded) easement or use restriction
- No right of access
- Inadequate or erroneous legal descriptions
Extended coverage protects against such additional defects as:
- Off-record matters, such as claims for adverse possession or prescriptive easement;
- Deed to land with buildings encroaching on land of another;
- Incorrect survey;
- Silent (off-record) liens (such as mechanics’ or estate tax liens); and
- Pre-existing violations of subdivision laws, zoning ordinances or covenants, conditions or restrictions.
What is a title search?
When we conduct a title search, it is an in-depth examination of the historical records found on a piece of real estate. These records will include deeds, court records, property and name indexes, as well as all other available documents. The reason we bother with all this is to verify the seller’s right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property that might come back later to cause problems for the buyer.
Why do I need a separate policy if my lender gets title insurance for its mortgage? The small additional expense of your separate owner’s policy is a bargain. In the event of an adverse claim, the lender would not be concerned unless the claim threatened the lender’s ability recover its principal and interest (through foreclosure). Also, the lender’s policy doesn’t cover the total value of the home, just the value of the mortgage. In the event of a claim, the lender’s policy has is no provision for legal expenses for an uninsured party.
How much can a title company charge in Florida?
The rates are set by the Florida Department of Insurance. A Florida title insurance owner’s policy and a Florida title insurance lender policy are usually issued simultaneously, with the policy of lesser value having only a nominal premium rate.
The current scale of Florida title insurance rate premiums is as follows (based on the insurance amount):
- Up to $100,000 a rate of $5.57 per $1,000 of insurance;
- Over $100,000 up to $1 Million a rate of $5.00 per $1,000 of insurance;
- Over $1 Million up to $5 Million, a rate of $2.50 per $1,000 of insurance;
- Over $5 Million up to $10 Million, a rate of $2.25 per $1,000 of insurance;
- Over $10 Million, a rate of 2.00 per $1,000 of insurance
Note that you only pay once, and then so long as you have an interest in covered property, you are always covered; the coverage also continues for the benefit of your heirs. Your coverage also continues if you sell the property, so long as you give a warranty of title to your buyer. Further, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage protects your secured interest in the property.
Who pays for title insurance?
In Florida, the cost can be negotiated in the contract and varies per county. The seller generally pays for the title insurance and chooses the title/closing company. However, in Sarasota, Collier, Miami-Dade and Broward counties, the buyer generally pays for title insurance and chooses the title/closing company. If you are a seller, you can choose your title/closing company by offering to pay for the buyer’s title insurance policy, thereby offering you better control of the transaction.
What if I have a problem?
If anyone makes a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. Title insurance includes coverage for legal expenses, which may be necessary to investigate, litigate or settle a claim.
What is Escrow?
Escrow opens when the buyer and seller sign a sales contract and a deposit is paid. The escrow is held open by a neutral third party (usually the title company’s bank) along with documents and instructions necessary to complete the transfer, until the sale is complete. The Real Estate Purchase contract serves as instructions for the escrow officer in terms of accounting for Escrow and release of Escrow funds.
Escrow assures that the lender releases the home purchase funds at or about the same time that the deed is recorded to reflect new ownership.
What is an Escrow Deposit?
Also known as an Earnest Money Deposit, the escrow deposit is money that a homebuyer puts down as a sign of good faith when purchasing a home. It is refundable until the end of the inspection period unless otherwise negotiated, but after that, if the transaction is cancelled, it is usually forfeited to the seller for their trouble.
How long do funds stay in escrow?
Usually 45 to 60 days, but it can be from a few days to several months. The escrow timeferame is determined by the terms of the Real Estate Purchase Agreement and the time taken to process your loan.
How do the new TRID Regulations affect me?
Mortgages are complex transactions that may include risky features, so we’ve issued a rule that will simplify and improve disclosure forms for mortgage transactions. Consumers currently receive different, but overlapping federal disclosure forms with the terms and costs of mortgage loans. Because these forms are confusing for many people, Congress directed the Bureau to create new forms. The rule replaces the current forms with two new forms: the Loan Estimate, given three business days after application, and the Closing Disclosure, given three business days before closing. Specific benefits of the new forms and rules include:
- Combining several forms and additional statutory disclosure requirements into two forms. This will reduce paperwork and consumer confusion.
- Using clear language and design that will help consumers understand complicated mortgage loan and real estate transactions.
- Highlighting the information that has proven to be most important to consumers. On the new forms, the interest rate, monthly payments, and the total closing costs will be clearly presented on the first page. This will make it easier for consumers to compare mortgage loans and choose the one that is right for them.
- Providing more information about the costs of taxes and insurance and how the interest rate and payments may change in the future. This information will help consumers decide whether they can afford the mortgage loan and the home, now and in the future.
- Warning consumers about features they may want to avoid, like penalties for paying off the loan early or increases to the mortgage loan balance even if payments are made on time.
- Making the cost estimates consumers receive for services required to close a mortgage loan more reliable, for example, appraisal or pest inspection fees. The rule prohibits increases in charges from lenders, their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies. Examples of the specific exceptions include when information provided by a consumer at application was inaccurate or becomes inaccurate, or when the consumer asks for a change in the services.
- Requiring that consumers receive the Closing Disclosure at least three business days before closing on the mortgage loan. Currently, consumers often receive this information at closing or shortly before closing. This additional time will allow consumers to compare the final terms and costs to the terms and costs they received in the estimate. That will better equip them to raise any questions before they go to the closing table.
Foreign Investment in Real Property Tax Act
What is FIRPTA?
The acronym for the Foreign Investment in Real Property Tax Act. FIRPTA means that a buyer must withhold 15% of the amount earned by a foreign seller in the sale of an interest in U.S. real property. If the seller is not a US citizen and the buyer fails to withhold, the buyer may be held liable for the tax, as the government may not be able to collect it from someone who is in another country.
Where can I find out more about FIRPTA?
www.irs.gov has all applicable forms and details. Please call us with any additional questions you may have.
If you still have any questions after reading our FAQ, please get in touch!
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