What is Real Estate Title?
Title work is the process in which public records are researched to ensure for the bank that the property will be sold or conveyed with a marketable title. You can shop around for a title agent or you can rely on the recommendation of a real estate professional or your lender. One key thing to know about title work is the title agent typically represents and performs the title work on behalf of the lender, not the buyer or seller.
A marketable title is just a fancy way of saying that the property you are buying is free from the threat of litigation. Title work will check a property for marketable title by taking a proactive approach to researching the chain of title and property for any current or potential issues. A majority of the title search will be done by researching public records such as previous deeds, mortgages, zoning documents, plats, surveys, and more. The property and boundaries are also researched via a property survey. A property survey can ensure that all the structures on the property are within the property lines and the neighbors do not have any structures on the property you are purchasing. If any of these items are discovered they are corrected as per the purchase agreement.
One of the final steps in the title process is putting together a closing statement for the buyer and seller before the closing. The closing statement is a breakdown of all the costs and numbers involved with the sale. These costs are constructed from the real estate purchase contract and are established at the time of negotiating the purchase agreement. Some of the most common costs at closing are property tax proration, county conveyance fee, real estate commission, and deed preparation. Other fees associated with the title process are a settlement fee, title search, closing protection coverage, lender fees, and title insurance
Three Common examples of Title Assurance
An examination that will provide what the public records show in regard to title. This report is used by an attorney to indicate whether title is marketable. This is not any type of title insurance, just an opinion of title to determine the marketability of title. An Attorney Opinion is only a possible instrument to correct a title defect for 4 years from the date of opinion as the only protection a buyer could have would come as a negligence claim against the attorney.
Certificate of Title
Another form of Attorney Opinion that reflects the marketability of title and the liens and encumbrances attaching to the land. This is not any type of title insurance, just an opinion of title to determine the marketability of title. A Certificate of Title is only a possible instrument to correct a title defect for 4 years from the date of opinion as the only protection a buyer could have would come as a negligence claim against the attorney.
The broadest form of Title Assurance is Title Insurance. Title Insurance policies are contracts between you and an insurance company. Under the terms of the policy, the company ensures that you hold marketable title to the real estate described in the policy. Title Insurance policies cover you against defects of title; however, there are exceptions to coverage that will be contained in the policy, and you and your attorney should carefully review the list of exceptions. A maximum amount of coverage (typically the purchase price) will be listed in the policy if a defect arises that is covered by the policy. The cost of Title insurance is typically higher than an Attorney Opinion or Certificate of Title as Title Insurance covers non-records items, such as fraud, forgery, false impersonation, execution by a minor or insane or incompetent, non-recorded deed(s), undisclosed marriages and/or divorces, but an Attorney Opinion or Certificate of Title do not.
There are two types of title insurance - a lender's policy and an owner's policy. When you obtain a loan, the lender will require that you purchase a lender's title policy to protect their investment in the property. Owner's title insurance is optional, but it protects the homeowner by paying claims and legal fees should a problem arise. A Lender's Title Policy does not protect the owner, only the lender. A Lender's Policy protects the lender's interest in the property should a problem arise. It does not cover the owner's equity in the property and will not pay the homeowner's legal expenses if there is a problem. Only an Owner's Title Insurance policy will protect the homeowner.
The cost of title insurance is a filed rate with the State of Ohio Department of Insurance and should be consistent by all providers. However, the title exam and closing services may vary based on the company you work with. Further advice regarding a title policy should be found via an attorney.
Owner's Title insurance is a one-time insurance issuance and will not require additional renewals and does not expire or lapse. An Owner's Title Insurance policy will be in effect as long as the buyer or the buyer's heirs own the property. (A one-time premium for the entire length of ownership)
A Lender's Title Insurance will be in place as long as the mortgage holder maintains a mortgage and promissory note for the property.
Closing Protection Coverage
One surprise that many buyers and sellers come across is the Notice of Closing Protection Coverage. By law, the title agent must provide you with a Notice of Closing Protection Coverage. This coverage generally protects you, if you purchase coverage, in the unlikely event the title agent disburses your funds in an inappropriate manner causing a loss to you or to your lender. You will be notified of this coverage prior to cloning during the title period and ask at closing if you want the coverage. A common misconception prior to and at closing is that Closing Protection Coverage protects your title for the property. Closing Protection Coverage is protection for you in case the closing agent steals the closing funds or fails to follow closing instructions provided by the parties. Ohio law mandates that Closing Protection Coverage be offered to all parties (seller, buyer, lender) at closing.
The title process typically runs very smoothly in the background of a transaction. Overall the process of title is a massive research project into the public records of the property being sold. If any issues are discovered the purchase contract will outline the party or parties that are responsible for correcting the issues. Keep in mind your real estate professional will be working with the buyer, the seller, and the title agent to ensure that things are running smoothly and everyone is up to date on the events of the search. Once everything is complete, it is time to prepare for everyone's favorite part, the closing.