If you are interested in joining the ranks of successful
women in real estate, it is important that you come to a
complete understanding of the fundamental elements
associated with real estate investing. Yes, few people find
the intricacies of title insurance exciting and many feel
it's down right boring. However, if professional women have
learned anything over the course of the past few decades,
it is that knowledge is power. In this regard, one of the
most important elements of the real estate investment
process is to understand how title insurance works.
So, read on and learn.
Title insurance is exactly as it sounds. It insures you in
case that at some later date, a recorded or unrecorded
document surfaces that can affect the title of the property
you purchased. Putting it simply, a title insurance policy
insures the ownership of the property, and protects you as
the owner.
Before providing a title insurance policy, the title
company examines, summarizes and classifies every document
affecting the property and its previous owners. Highly
skilled title searches assemble this material and forward
the results to a title officer. The title officer or
examiner then writes an opinion on the title. The opinion
will initially take the form of a preliminary title report
and ultimately become a policy of title insurance.
Although title insurance is designed to protect a purchaser
of real estate against title defects that are discovered
after that individual takes title to a piece of property,
the real work of a title insurance company is actually
undertaken in advance of the closing on the sale itself.
After a real estate sales contract is executed between a
seller and purchaser, a preliminary title search is
performed and then a policy of title insurance is obtained.
This means that the title insurance officer physically
evaluates the deed to the property, and then reviews all of
the liens and encumbrances that have been filed against
that deed over time. This effort by the title insurance
company is designed to ascertain that any liens or other
encumbrances that may have been placed against the property
in the past have been released.
Any liens or encumbrances remaining on the deed or title to
the real estate subject to sale will prevent the buyer to
obtain "clear" title because every questionable item
recorded on title is classified as a defect or "cloud" on
title. One of the essential clauses in real estate sales
contracts requires the buyer to deliver "clear" title of
the property to the purchaser by a certain date.
Therefore, the title insurance company will take all
necessary steps to clear up any "clouds" on title within
the time frame mandated by the contract for the sale of the
property.
As mentioned, if for some reason there is a defect on title
- a lien or encumbrance not discovered before the new deed
is recorded - the title insurance company is responsible
for any loss sustained by the real estate purchaser because
of that title defect. In most instances, the loss sustained
amounts to legal fees and court costs associated with
taking action to clear the defect.
If the purchaser or real estate investor does not have
adequate title insurance, she is the one who sustains the
loss. This is why it is vital to forgo standard title
insurance and invest in extended coverage policies with
every one of your transactions.
Top SEVEN ways your property can be put at risk:
Your property can be put at risk in a variety of ways. If
your property does not have clear title, any questionable
recorded or unrecorded documents may have been executed
many years before, yet surfaced much later. In this case,
know that you are protected by title insurance. Below are
seven common items that can put your property risk.
1. Forged deeds, mortgages, satisfactions or releases
2. Deed by person who is insane or mentally incompetent
3. Deed by a minor
4. Deed from a corporation, unauthorized under corporate
bylaw
5. Deed by partnership, unauthorized under partnership
agreement
6. Deed given under fraud or duress
7. Deed executed under falsified power of attorney
Top SEVEN things to look for:
If any of the following items appear on the preliminary
title report, you must take immediate action. The first
step is to contact your title company. Failure to
investigate any of the following may cause a significant
delay in closing of escrow and/or decrease your profit.
1. Tax Liens
2. Mechanics Liens
3. Notice of Action/Judgments (including back child support)
4. Bankruptcies
5. Uninsured Deeds
6. Legal Access to and from the subject property
7. Typos in the legal description and/or parties' names
Two Separate Policies
Nearly every sale of a residential property involves the
purchase of two separate policies of title insurance. One
policy names the buyer as the interested party and the
second names the lender as the insured party. It is
customary for the seller to provide and pay for a title
insurance policy on behalf of the buyer. This is done so
that the buyer can be assured that the property does indeed
belong to the seller and that there are no unexpected liens
or encumbrances against it. If the buyer borrows money to
purchase the house, it is normally a requirement of the
loan that the buyer purchase title insurance on the
lender's behalf for the amount of the loan and sometimes
for the amount of the entire sales price.
One-time Investment
The purchase of a tile insurance policy is single purchase
transaction. You pay one premium, and the policy stays in
force until you sell or refinance your property. There are
no recurring fees. Premiums for the title insurance policy
are usually based on the amount of risk assumed by the
insurer. The liability is based on the sales price of the
property, or, in the event of a lenders policy, on the
amount of the loan.
In conclusion
It would be to your benefit as a woman investing in real
estate, to have a working relationship with a helpful and
motivated title representative whose sole purpose is to
sell title policies on behalf of his or her employing title
insurance company. Find out what he or she is willing to do
in order to earn your business.
- Will the company allow you access to their public record
database?
- Can you request and receive copies of recorded documents?
- Will the company create property profiles for your hot
deals?
- Can the company set up a farm (territory) to help you
generate leads?
Ask ahead of time. A good working relationship with a title
insurance company enables you to conduct business
efficiently. In simple terms, everyone investing in real
estate must know the specifics and the complexities of
title insurance and the benefits of building a solid
relationship with a good title representative.
----------------------------------------------------
Brenda Coté is a Real Estate Investor, Real Estate
and Mortgage Broker, Mentor, and Wealth Coach. At
Transforming Lives, Creating Wealth, Brenda employs a
"whole person" approach to support female Real Estate
Investors succeed in business and life. To receive a FREE
copy of Brenda's Report, "The Seven Biggest Mistakes Women
Make When Creating Wealth Thru Real Estate" please go to:
http://www.TransformingLivesCreatingWealth.com
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