What Every REALTOR® Should Know About Title Insurance

Make sure your clients are protected

The process of buying a home has gotten pretty complicated, with mounds of paperwork and documents to sign. Fees show up at closing that can sometimes be a big surprise to the buyer, who often has no idea what they’re for.

Title insurance is one of those charges little understood by home buyers, who often see it as just another fee they have to pay to buy a home. As an important advisor to your clients, you can help them understand the value that title insurance provides, and the dangers that can be incurred without it.

Title insurance protects against problems affecting the title to a home, which is probably your client’s most valuable asset. There are two types of title insurance policies. A Loan Policy is almost always required by the lender and insures the title for the amount of the mortgage loan. An Owner’s Policy, on the other hand, insures the homeowner’s investment, such as their down payment and equity. Both are needed.

Having a problem with a title can seem rather remote because, historically, the title insurance industry has not had to pay a large amount in claims. This is due to the exhaustive due diligence work that is performed by the title company prior to closing. The American Land Title Association estimates that one out of every four title searches reveals a problem with the title.

Because of the corrective work that title professionals perform, most buyers are unaware of these problems and the closing goes smoothly. Few problems with title ever end up resulting in a claim. However, when it happens, not having the proper protection can be devastating to a homeowner.

Some title problems are easy to detect, such as prior tax liens or a lien from an unpaid subcontractor. But other problems can be more difficult to detect, such as forged signatures in the chain of title, recording errors, undisclosed easements or title claims by missing heirs or ex-spouses. For this reason, having both a Loan Policy and Owner’s Policy ensures that your clients are fully protected.

Relieving the Stress of Home-Buying

One of the interesting things I see as a closing agent is the stress the buyers can be under with all of the things they shouldn’t do between the time they write a contract to the time they get to the closing table. This should be a joyous occasion. Owning your piece of America. But the stress they feel can be alleviated easily with the right approach, a good loan office and a smart Realtor.

Ensuring you have a team behind you that knows how to explain things really makes a huge difference. But many buyers fall into the excitement pitfalls that can happen when buying a home. Some things to you should remember are:

1. Don’t make any BIG Purchases. Excitement of window treatments, new furniture, wall hangings, and whatever else you need to make your house a home can be exciting and you want to run out and buy it all. But running up those credit cards, or draining your savings account can be a hit to your credit and reserve funds the lender may need you to have for the closing.

2. Paperwork. Yeah, we all get tired of signing the pile of documents, but ensuring they are all done in a timely manner can allow things to happen on time, and happen smoother. Getting documents the lender needs quickly lets them process the loan faster. In turn will help the loan get full approved faster so we can close on time.

3. Inspection Repairs. Sometimes during home inspection, you find items needed to be corrected. Your Realtor will request these items be taken care of. But be sure to monitor the progress of theses items. Sometimes they can cause a delay in the closing if not completed on time, or not completed properly. Using licensed contractors is very important for certain repairs. Your Realtor will guide you in the right direction.

4. Closing Costs. Most Realtors and Loan Officers have a really good grip on the fees the market will allow. So don’t get sticker shock when it comes to closing time. Shop around, it never hurts to get second or third opinions from a different title company than who your Realtor or lender may suggest. But remember, you the consumer have the right to close the title company doing your closing. But also remember, cheaper isn’t always better.

Who Has Your Power?

What super powers do you expect to utilize when you buy a house?  Your Realtors?  The Loan Officers? Or maybe the Title Company?  Yes, they all have some super powers.   Sometimes, you may have the need to have someone else sign documents for you for any number of reasons to buy that dream house.  Whatever those reasons are, a Power of Attorney is the document that will be required.

Power of Attorney documents come in all different shapes and sizes.  Each dealing with their own issues and each for their own reasons.  Some terminate, some do not.

  •  General POA- used for many reasons, and allows the person with the power to do a lot.  Terminates upon death or a specific date.
  •  Durable POA – most often seen for medical reasons or estate planning, but has many uses.  Can remain in force upon death or mental or physical incapacity.
  • Specific POA- sometimes referred to as a Limited POA, is used for a specific reason for a specific time period.

For your settlement, a Specific POA is a required. 

I Still Have Credit

In recent years, credit line loans were very popular.  Often called a HELOC, or Home Equity Line of Credit, lenders would allow home owners to have a ‘line’ for up to 125% of the value of their home.  Once popular because some considered it to be an emergency fund, the use only when needed money.  And when making payments, you only paid on the money you have accessed, like a credit card.  During the recent economic times, most lenders have made it difficult, yet not impossible, to open new credit lines, using real property as collateral.

Once a person sells their property and pays off this loan, it is to be closed down completely so no access for funds may ever be made again.  Some have slipped through the cracks, as you would suspect.

Imagine, you sold your home 3 year ago and suddenly get checks in the mail with a letter saying you have funds available.  Hot diggy dog, lets go shopping…… and not pay the bill, because we sold that house.  Scary, but true,  it happens.  The good thing?  You as the new buyer have Owners Title Insurance that protects you so it isn’t YOU that has to pay back those funds the prior owner accessed.

In the State of Virginia, a lender is required to release the lien against the property within 90 days of its payoff.  Title Concepts tracks every payoff we make, ensuring that each lien is properly released by the lender, which in turns gives your clients the peace of mind knowing their property is secure.

Contact us for more information on how we can help you have a smoother closing tomorrow.

Title To What?

Buying real estate is can already be a long and drawn out process.  After closing is completed, owners and lenders title insurance is in place, you can move in and relax, right?  You certainly should.  But did you take title the way you needed to?

Here in Virginia, there are several ways in which you can own real property.  Without getting into the business aspect of title, I will cover the ways for the average buyers to hold title.

  • Sole Ownership.   A single man or woman who is not legally married, OR a married man or woman as HIS or Her Sole and Separate Property.  This language will actually be printed on the deed to be recorded that will ensure the title his held in a separate estate.
  • Co-Ownership.  This is title to property that will be owned by two or more persons.  Within this type of ownership there are several different areas to explore.
  1. Tenants in Common.  This form is when there are two or more individuals holding an undivided fractional interest.  Basically each share in the property is entitled to a comparable portion.  Each person may sell, lease or will their own share, but cannot take out a voluntary lien, such as a mortgage, without each owner agreeing.  Involuntary liens, such as a judgment, will affect the title in whole, therefore must be paid upon the sale of the property.
  2. Joint Tenants with Right of Survivorship.  This is two or more individuals who may or may not be married, or even related, who own equal interests in the property which is subject to the surviving owners.  Basically it means that each person holds an interest, and if one of the persons should pass away, that portion of interest in automatically transferred to the remaining owners in equal shares, therefore joint tenant property is not subject to probate or to disposition of a will.  However, the proper language MUST be written on the deed prior to its recording to actually state the joint tenancy.  Without the proper language, it is automatically assumed that title is Tenants in Common.
  • Tenants by the Entirety with Rights of Survivorship.  This form is reserved only for married couples to hold title with the same survivorship features as the Joint Tenancy allows.  There is always a possibility of tax benefits as well, but your accountant can give you further information on that area.

If you are unsure of which way you need to hold title, please contact your attorney, or we can put you in touch with one of our real estate attorneys.

Why Have Owners Title Insurance?

I do many closings each week. Some for refinances, some for purchases . I enjoy meeting each and every person. I enjoy educating them on the things that they need to know and listening to them tell me all about how this is the house they have been searching for when they are buying. Rarely do I talk about the bad things that may have come up, or the stories of bad things I have heard.

As I sat at a closing awaiting the arrival of the Realtor, the buyer and I began to chit chat