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CLOSING AND TITLE INFORMATION

When it’s the big day,  you will have questions about closing and title costs.  You can expect to go to the title or escrow company, sign your name on the dotted line, and hand over a check.  Then, prepare to take ownership of your new home!

It’s also the day you and the seller will pay “closing” or settlement costs.  Settlement costs are an accumulation of separate charges paid to different entities.  These charges are for professional services associated with buying and selling real property.

Often, this day is filled with uncertainty and stress.  In effort to help you better understand this confusing subject, the Land Title Association has answered some of the most commonly asked questions.

CLOSING COSTS

What services will I be paying for when I pay closing costs?

Usually, you will pay for real estate commissions, appraisal fees, loan fees, and escrow charges.  You will also make advance payments.  This may include property taxes and homeowner’s insurance, title insurance premiums, pest inspections and the like.

How much should I expect to pay in closing costs?

Your closing cost will vary in amount.  However, after you submit your loan application, an estimate of your closing costs will be provided, and it will be pursuant to the Real Estate Settlement Procedures Act. The disclosure provides you with a good faith estimate of what your closing costs will be in the real estate process. When you close your transaction and take title to your new property, an itemized list of charges will be prepared for you.

Can I pay for my closing costs in installments?

Closing costs cannot be paid in installments.  Upon closing, many different parties, who have fulfilled their responsibilities, will be awaiting payment. Those parties will be disbursed money by the title or escrow company.  This is pursuant to the escrow instructions.

Will I be allowed to write a personal check to cover my closing cost?

Title or Escrow companies may find personal checks unacceptable.  Then, the closing process may be delayed.  You should make your closing funds in the form of a cashier’s check.  The cashier’s check should be issued by an institution in the state you are closing in.  Make the cashier’s check payable to the title company or escrow office in the amount requested.  An out-of-state cashier’s check could also cause a delay in your closing due to possible delays in clearing it.

TITLE INSURANCE

How much can I expect to pay for Title Insurance?

Title Insurance is often misunderstood. Although the title company or escrow office usually serves as a meeting ground, only a small percentage of total closing fees are actually for title insurance protection.

Your title insurance premium may actually amount to less than one percent of the purchase price of your home and less than ten percent of your total closing costs. As long as you and your heirs own the property with the payment of only one premium, the title policy will remain good.

Why are separate owner’s and lender’s Title Insurance Policies issued?

Because Title Insurance offers security, both you and your lender will want it.

Your home is an important purchase.  You will want to be certain your home is all yours. Therefore, title insurance companies insure your rights and interests in order to protect you against claims. The lender is looking to insure the enforceability of their lien on your property and marketability. 

What is meant by “marketability”? 

Local lenders will originate a loan.  Afterwards, they often sell it to an out-of-state investor. This investor, who may never see the property, needs to know that he has a valid and enforceable lien. Title insurance is the way of making certain there is an enforeable lien on the property.  Without a current title policy, the loan is essentially unmarketable.

TITLE DOLLAR

What does my Title dollar pay for?

Title insurers, unlike property or casualty insurance companies, operate under the theory of risk elimination.  Moreover, risk elimination can only be accomplished after an intensive period of risk identification.

Title companies spend a high percentage of their operating revenue each year collecting, storing, maintaining and analyzing official records.  Subsequently, they gather information that affects title to real property. Because of this, the issuance of a title insurance policy is highly labor-intensive. It is based upon the maintenance of a title “plant” or library of title records.  In many cases, this will date back over a hundred years. Each day, recorded documents affecting real property are posted to these plants.  Information is organized and ready for when a title search on a particular parcel is requested.  This results in rapid and accurate retrieval.

TITLE EXPERTS

Trained title experts are able to identify the rights others may have in your property.  In addition, they have the aid of their extensive title plants.  This may include recorded liens, legal actions, disputed interests, rights of way or other encumbrances on your title. Before closing your transaction, you can seek to clear those encumbrances which you do not wish to assume.

What is the goal of title companies?

Title companies have a goal to conduct such a thorough search and evaluation of public records that no claims will ever arise. Of course, this is impossible, because we live in an imperfect world.  Human error and changing legal interpretations make absolute risk elimination impossible. However, when claims do arise, title insurance companies have professional claims personnel to make sure that your property rights are protected pursuant to the terms of your policy.

To conclude, when you pay for your title insurance policy, you are paying for a team of professionals.  In addition, they have worked together to deliver you a title insurance policy which represents protection for your ownership of real property.

MORE INFORMATION

Who can I look for straight answers on Title, Closing, and closing costs?

Because you may have more questions, title or escrow company personnel are available to review and explain your title policy and your closing statement.

Article by CLTA

Broker Reciprocity Courtesy of Vista Real Estate

 

All information deemed reliable but not guaranteed and should be independently verified. All properties are subject to prior sale, change or withdrawal. Neither listing broker(s) nor Vista Real Estate shall be responsible for any typographical errors, misinformation, misprints and shall be held totally harmless.

 

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