A typical real estate transaction has three distinct parts after the contract is signed by the parties:
Each of these stages is explained below in general terms to help you understand our role in your real estate transaction. Additionally, the role of title insurance in a real estate transaction is explained to assist buyers and lenders in understanding this important aspect of any real estate sale. We strongly encourage the purchase of title insurance in all real estate transactions.
First, after receiving the contract or closing instructions from one of the parties, we will order a title search for the property. The title search will research a title to make sure the property is free and clear of any liens, encumbrances or taxes. This involves an examination of public records and any other matters necessary to determine whether the seller has good and marketable title to the property.
Second, we will coordinate with the realtors, or buyers and sellers directly, about ordering the survey, septic inspection, wood destroying organism (“WDO”) inspection, or any other matters required to be completed prior to closing. These matters are unique to each piece of property and the specific requirements of the lender/
Third, we will request a pay-off or assumption information from any lenders or creditors with an interest secured by the property. For instance, if the seller has a mortgage on the property, we will request the pay-off amount so that the lender’s mortgage would be paid off in full at the time of closing.
Fourth, we will coordinate with the lender and begin to prepare all necessary documents to be executed at the closing.
The day before or the day of the closing (or as early as possible prior to closing), we will contact the buyer to give the exact amount of money needed for closing. Unfortunately, this generally cannot be done sooner because the figures needed to compute the final closing costs are often not received from the lender until shortly before the closing. The buyer will need to bring a certified or cashier’s check for that amount to the closing made payable to our trust account.
At the closing the buyer will be presented with several documents for signature. These may include items such as a note, mortgage, truth-in-lending statement, and settlement statement. In addition, the lender will often require other documents to be signed, such as anti-coercion disclosures and agreements for future cooperation. These documents will be explained to the buyer and the seller at that time, as they are unique to each lender and transaction. The seller will be required to sign the settlement statement as well as the deed and other documents necessary to complete the settlement. All monetary adjustments and prorations between Buyer and Seller will appear on the settlement statement.
When a Buyer and Seller leave the settlement table, their part is finished; however, our job continues. Following the closing we will: (1) review the settlement statement and all documents involved; (2) assemble and return the lender's package in accordance with the lender's written instructions; (3) record deed, mortgage or assumption documents in the public records; (4) disburse all funds to the appropriate parties; (5) issue the title insurance policy; and, (6) if required, after paying off the appropriate lenders, obtain, or prepare and record all releases.
Virtually every lender requires title insurance as a prerequisite to accepting mortgages on residential and commercial real estate. Although title insurance has existed since the late 1800’s, its popularity has grown with the onset of secondary mortgage markets. Secondary markets are a method for lenders to “sell” mortgages to investors in the same way that bonds and other securities are sold. The investors purchasing mortgages in secondary markets almost always require title insurance.
Real estate title insurance very simply is an insured statement of the conditions of one’s title or ownership rights to a certain piece of real estate. The policy insures that the property being purchased or mortgaged is free from undisclosed liens or rights. Additionally, a policy of title insurance guarantees that any confusion as to rights of ownership will be resolved in favor of the party owning the real estate or the company will refund the policy limits to the policy holder.
Under Florida law, a party purchasing real estate is always offered the opportunity to purchase an Owner’s Policy of Title Insurance by the law firm or title company conducting the real estate closing. The owner’s policy of title insurance insures that the owner has good and marketable title to the property, free from any encumbrances or liens that would adversely affect the property with the exception of defects or liens made known to the buyer, and insures to the owner that if any such liens, encumbrances, defects or other title problems become known, the title insurer will defend the buyer’s title to the property.
In many instances we are asked whether or not title insurance is necessary or advisable for the owner to purchase. We always strongly recommend the purchase of the title insurance for a few simple reasons. First, the premium for purchase of the title insurance policy is a one time charge, paid at the time of closing. There are no further charges for the insurance. Second, since buyers usually borrow money to finance the purchase, the majority of the cost of the title insurance policy has been paid for by the premiums of the lender’s policy which is required by the loan. For a minimal charge, buyers can insure against a variety of problems which could occur in the future. These items include forged documents in the chain of title, signatures of mentally incompetent persons or minors which are unknown to the party reviewing the title, mistakes or inaccuracies in recording of legal documents of title, undisclosed or missing heirs, fraud in the execution or in the handling of a transaction in the prior chain of title, invalid divorces or misrepresentation of marital status of the parties signing the documents, unpaid taxes which were not paid prior to the purchase of the property, and most importantly clerical errors in the public records and claims of unknown parties. These are just a few of the issues which can arise during the course of anyone’s ownership of real estate. Title insurance, like any other insurance, protects against the eventuality of an unforeseen and an unfortunate circumstance.