What is a title?
Title is the recognition of ownership to real property. When you hold title to a property you have the right to own and occupy the property and the right to transfer ownership of the property. Title is evidenced by a deed or other document recorded in the public records of the county where the property lies.
What is a title search?
After your sales contract has been accepted, a Title Company or attorney will be assigned to perform a title search on the property. The title search is the process of examining the public records and legal documents to confirm that the seller is the legal owner of the property, what restrictions or allowances apply to the use of the property, such as easements, and to determine if there are any claims or liens against the property. Once the title search is complete, the title company will issue a report or commitment for title insurance that details the results of the search.
What is title insurance?
Title insurance protects against financial loss due to problems and hidden defects that affect the title to your home. The two most commonly issued title policies in Texas are Loan Policies that protect the lender and Owner’s Policies that protect homeowners.
If you are borrowing money to purchase property, your lender will most likely require you to purchase a Loan Policy to protect their financial investment in the property. By obtaining a Loan Policy the lender is assured that they have a valid, enforceable lien and should a person’s claim to your property prove to be valid, the Loan Policy will repay the balance of your loan.
An Owner’s Title Policy protects the homeowner from financial loss due to problems with title that arise after you purchase your home. By obtaining owner’s title insurance you are assured that your title company will provide a legal defense and cover legal expenses to fight claims against title to your property. Should a claim prove to be valid, you will be covered for your actual financial loss up to the amount of your policy.
If I am required to purchase a Lender’s Title Policy, won’t that protect me as the homeowner?
The lender’s title policy protects only the lender’s interest in the property. It does not cover the current owner’s equity in the property and will not pay the homeowner’s legal expenses if there is a problem with title. Only the owner’s policy will protect the homeowner.
What does my Owner’s Policy cover?
Even after a thorough title search there can be title defects that are missed or hidden and may not be discovered for months or even years after you purchase your property. Your owner’s policy will protect you against these defects by defending your title in court and covering any actual loss due to covered circumstances. Circumstances covered by your Owner’s Policy include:
- Liens filed against your property due to a previous owner’s failure to pay a mortgage, a judgment, taxes, special assessments or homeowner’s or condominium association charges
- Liens for labor and materials furnished by a contractor that you did not authorize
- Mistakes made during the examination of records
- Clerical errors in public records
- A previous owner’s undisclosed or missing heir appears and claims title to your property
- A previous owner misrepresented their marital status and their legal spouse is now claiming title to your property
- Legal restrictions on how you can use your property were not disclosed in your title policy
- Title defects created by an invalid deed in your chain of title due to forgery, fraud, expired, fraudulent or otherwise invalid power of attorney, a signature given by force, a signature by a person of unsound mind or a signature by a minor
- An invalid deed in your chain of title due to a signature from a defunct corporation or a signature by a corporation not authorized to sell real estate.
- A defect in title caused by an improper previous foreclosure on your property
- Problems created by a misinterpreted will
What problems are not covered by my Owner’s Policy?
Title insurance provides invaluable protection to homeowners but it does not cover every loss or problem with your title. There are exceptions to your coverage and it is important to read your policy and understand what it does not cover. If you have questions or concerns about your coverage, contact your real estate attorney for an explanation.
Title insurance does not guarantee a property has good, clear title, and a title search by an experienced title company is essential prior to closing. Your policy will not guarantee that you will be able to borrow money against the property or the ability to sell your property. Other defects and problems that a standard title policy generally will not cover:
- Title problems that occur after the date you purchased the policy
- Title risks that you create or allow by not paying your mortgage payments, taxes, association charges, special assessments and other related charge
- Violations of building and zoning laws that control how the land is used, land improvements, land division and environmental protections
- Restrictive covenants that regulate or limit how you can use the property or requirements for building on the property
- Condemned land is not covered, unless the notice of condemnation appeared in the public records on the policy date or unless the condemnation occurred before the policy date and is binding even if you did not know the land was condemned
- Unrecorded title defects that you had knowledge of or allowed to occur
- Property damage and loss due to fire, flood, theft or any other damage or loss that is non-title related
- Claims made in bankruptcy proceedings
- Title problems created by a deceased person’s estate or a trust
- Water and mineral rights
- Loss caused by encroachments, overlaps, boundary line disputes and other matters that would be disclosed by an accurate land survey or inspection of the property – you can purchase an amendment to this standard survey exception, often called survey coverage. Contact Celebrity Title for more information.
- Losses from rights claimed by “parties in possession” – such as renters or someone occupying the land. If you want to remove this exception from your policy, the title company can inspect your property and possibly delete this exception. The title company can charge a fee for the inspection.
Do I really need an owner's title policy?
Without an Owner’s Policy, you are not protected and you could end up paying a previous owner’s debt. An Owner’s Policy affords you protection from unexpected and costly surprises down the road where you may become responsible for a previous owner’s debt, taxes and other issues. Should a title claim arise and you do not have title insurance, you are responsible for all of the costs to defend your claim to title including attorney fees, court costs and any payment required to resolve the claim.
How much is title insurance?
The basic rate for a title policy is directly related to the sales price of your property. In Texas, title insurance rates are set by the Texas Department of Insurance. This means that your cost for a standard owner’s title policy will be the same no matter which title company you choose. To see a table of title insurance rates for Texas click here.
Unlike other types of insurance there are no renewal premiums for title insurance. The premium is paid only once at closing and remains in effect for as long as you or your heirs own the property.
Who pays for the title policies?
The Owner’s Policy premium can be negotiated by the buyer and seller in the sales contract. The Loan Policy is paid for by the purchaser or the borrower in a refinance transaction.
What does the title company do and how are they involved in real estate transaction?
Title companies play an integral role in the closing process of your real estate transaction. We are responsible for managing the closing process and conducting the actual closing and signing of your documents. It is our responsibility to coordinate the interests of all parties in a real estate transaction including the buyers, sellers, mortgage lender, and the real estate agents and to ensure that all requirements for settlement are fully satisfied.
Our main function in the real estate transaction is to issue title insurance but we perform many other vital functions in the closing process. Celebrity Title:
- researches the title to the property
- works with all parties to clear any title defects and encumbrances
- verifies that all taxes and association dues are current
- coordinates with the lender to receive all documents necessary for State and Federal Laws
- coordinates with all parties to schedule a closing date and time
- prepares the settlement statement according to the lender’s instructions and terms of the sales contract
- conducts the actual closing and signing of documents
- collects and disperses all funds related to the transaction
- prepares and ships the lender’s closing package
- records the documents in the courthouse such as the Deed, Deed of Trust and Releases for any existing liens satisfied at closing
Who does the title company represent?
The title company is a neutral “third party” that does not represent any party to the transaction exclusively like an attorney would represent a client. The title company’s role is to make sure that transfer of ownership and receipt and disbursement of funds is handled legally and fair to all parties.
Can I choose which title company I want to use?
Absolutely. Celebrity Title would be delighted to handle your real estate transaction! Our staff has collectively closed THOUSANDS of transactions so we know how to solve even the most complex issues that can arise during the closing process. Our closing officers have all been on your side of the table as buyers and sellers so we understand that buying and selling a home is an exciting time but can also be stressful. You have our commitment that we will work diligently to make your transaction go as smooth and as stress-free as possible.
How long does the closing take?
Closing and settlement typically takes about an hour if the buyer is signing mortgage documents. If it is a cash transaction, closing should take about 30 minutes or less.
Can the buyer and seller sign at different times?
Yes. The buyer and seller can sign at different times on the same day or sign at the same time.
What documents will I be required to sign at closing?
On closing day anyone named on the Deed of Trust and Note must attend the closing to execute the documents. Documents will vary depending on the type of transaction. The following is a general list of the documents to be signed at closing:
HUD-1 (Settlement Statement)
This form, required by federal law, itemizes the charges and credits to be given to the buyer and seller. It will also indicate the amount of money the buyer needs to bring to closing. The settlement statement is completed by the title officer who conducts the closing and both the buyer and seller must sign it.
The mortgage note represents your promise to pay the lender according to the agreed terms and any penalties assessed for default. Again, the terms of the loan are set forth, including the date on which your payments must be made and the location where they must be sent.
Deed of Trust
The mortgage of "deed of trust" is the legal document that secures the note and gives the lender a claim against your house if you default on the note's terms. In effect, you have possession of the property, but the lender has partial ownership, called an encumbrance, until the loan has been fully repaid.
Truth-in-lending (TIL) Statement
The Truth-in-Lending Statement is required by federal law. It must be provided to all loan applicants within three business days of receiving their initial application. It discloses the annual percentage rate (APR), which reflects the cost of your mortgage as a yearly rate. This rate may be higher than the interest rate stated in your mortgage because the APR includes any points, fees, and other costs of credits. The TIL Statement also sets forth the other terms of the loan, including the finance charge, the amount financed, and the total payments required.
You may be asked to sign numerous affidavits where you, the buyer, promise that you intend to occupy the home, that there are no side agreements between you and the seller, that you did not borrow money for your down payment, that you are still employed and that you agree to sign or initial corrected documents or sign any necessary additional documents. The seller will also sign an affidavit that to the best of their knowledge, no other liens or title disputes exist against the property.
The Warranty Deed
The seller signs this document to transfer title to the buyer. It contains the legal description of the property being transferred and is recorded in the county courthouse where the property is located.
What should I bring on closing day?
You will need to bring the following items to your closing:
A valid driver’s license, passport or federal/state issued photo ID card are acceptable.
Closing funds must be in the form of a cashier’s check or wire transfer. Contact your Closing Coordinator at Celebrity Title for wiring instructions.
Any additional documentation you have been asked to supply as a condition of the loan or terms of your sales contract. For example, receipts or invoices for required repairs.
Will I get the keys to the property after I sign my closing documents?
In most cases, once all documents are signed and all funds have been exchanged, you will be given the keys to your property. Congrats on your new home!