How A Real Estate Title Insurance Company Works For You

At Title Junction, we meet with many clients and handle numerous real estate closings every year.  Some of our clients are veteran homebuyers and others are going through their first property purchase.  Homebuyers and sellers alike sometimes wonder what the role of our Cape Coral title insurance agency plays in their transaction.  What services do we provide to them?  How does our work assist their transaction in going through?  And whose interests do we represent?

Investigating Properties

A real estate title agency’s services may be best described by using the words investigation and facilitation.  We investigate property histories and facilitate real estate closings.

One of the primary roles of our title agency is to conduct a derailed search of the public record for the property that is to be closed on.  This search is called a title examination or a title search.  Real estate title agencies will examine public records going as far back as the records exist to ensure that the property is unencumbered and legally available for sale.  We look for things such as back taxes owed or liens on the property and research the ownership history, survey data and property tax history.  This information is then compiled in a document called an Abstract of Title.

Facilitating Closings Through Notary And Other Services

In addition to investigating the history of the property, we also offer real estate closing services including Fort Myers escrow and notary services.  At Title Junction, we handle residential and commercial real estate transactions by conducting title searches, acting as a closing agent, escrow agent or notary, providing title insurance or even hosting outside closings at our offices.

As the closing agent, a real estate title agent will oversee the transfer of interests, ownership and funds during the closing.  The closing agent makes sure that no funds change hands until all of the necessary paperwork has been completed properly.  If our title agency is also acting as the escrow agent, they have a fiduciary responsibility to hold the buyer’s escrow payment until the closing is complete.

Protecting Your Investment With Title Insurance

Last but not least, the real estate title agency often provides title insurance for the property.  Title insurance is an indemnity policy that protects both the buyer and the lender from unforeseen claims as a result of past ownership activities.  Separate policies are issued for the owner and lender and they will protect each party from financial loss due to claims that arise as a result of title problems.  These one-time only policy purchases are paid for at closing.

Impartial Service Provider

Perhaps the greatest service a real estate title company can offer is its impartiality.  The job of the title agent is to follow the rule of law, closing instructions, transaction documentation and to generally make sure everything is in order for the sale to close successfully.  This impartiality safeguards everyone’s interest in the property and defines title agencies as a trustworthy place to do business.

What Are Real Estate Commissions?

 

Like the video says – real estate agents aren’t paid by the hour!They’re paid a percentage of the purchase price in a successful real estate transaction.

When one agent represents the sellers and another represents the buyers the commission is typically split between them.
In the US, real estate commissions are commonly 6% of the transaction usually 3%/3% when split.

No government or industry body sets commission rates.  Legally, commission rates ARE negotiable.  However, remember that agents only earn their commission on successful sales.

Consider the work you want them to do for you to evaluate the value you should put on the commission they earn.

What Is “Prime”?

 

The Prime Lending Rate – sometimes just called “Prime”  – is the interest rate that banks charge each other for overnight loans. Some consumer rates – like ARMs – are set in relation to Prime.

In the US, Prime is affected by the Federal Reserve lending rate to banks; historically, Prime is about 3 percent above the Fed rate.

The video shows  an example.

  • The Federal Reserve loans to Bank A at 1%
  • Bank A loans to Bank B at 4%
  • Both banks – A & B – will recalculate variable-rate loans like ARMs on that 4% Prime figure.

ARM rates are frequently defined as “% above Prime” – that gap is usually called the “margin” or “spread.” Just remember those 3 layers in Prime: Federal Reserve Bank A Bank B And finally, YOUR rate.

Closing Costs Explained Visually

 

Purchasing a home is exciting. Once escrow begins, the excitement can change to frustration, particularly if you are not ready for the closing costs that quickly accumulate.

Closing costs simply refer to the fees associated with various things associated with the escrow process in a real estate transaction. In the excitement of having an offer accepted for your dream home, you can easily lose track of the fact you are going to need to have some serious cash on hand to pay them. Many people make the mistake of only assuming they need the down payment money, and have to rush around town trying to come up with money for the closing fees.

Do yourself a favor, and discuss closing costs in advance with your real estate or mortgage person.  And watch this video to have a good mental picture of the costs that you’re likely to incur.

 

Title Insurance Explained Visually

 

What is title insurance and why should any buyer get it when purchasing a home (single family, townhouse, condo, apartment, or whatever format your home purchase takes)? Doesn’t the attorney or settlement company handling the closing see to it that you have a clear title? Isn’t this just another way for someone to siphon a few coins off a real estate transaction?

Title insurance prevents the property owner from suffering financial loss if, at any time during his ownership of the property, someone comes along who can show that they have full, or partial, ownership of the property instead.

A careful title search is done at the time property changes hands. On rare occasions mistakes are made anyway. Property can change hands in a number of ways including by deed, by will and by court action. Typically, these proceedings are recorded in different places. Searching the history of ownership to be sure nothing has fallen through the cracks is a tedious job that requires alertness, intelligence, and skill.

It is very likely that the value of your property will go up over the years. As time passes, these elements are likely to result in your home equity’s being your largest asset. Just how devastating would it be if you eventually discovered that someone else owned what you’d always thought was your home?

Do yourself a favor. When you buy a home, buy title insurance.  And watch the video to understand the essentials.

Which Square Footage Figure Should I Use?

 

Home size is one of the key figures used in comparisons.

But you may have different measurements to choose from,  as you’ll learn in this video, including builder, appraiser, tax records and possibly owner records.

Which one is right, and which one is best?

The official figure is the one in tax records – typically, the county.

Any other figure must be documented by a builder’s floor plan

an appraisal or an official floor plan, prepared by a company for a fee.

If your house has been remodeled and you’re planning to sell

you may want to confirm that the official record matches your actual house – and update if required.

Most lenders will require an appraisal which will verify the figures you used. So be accurate and keep records to make the most of your sale.

 

What Is An Appraisal?

 

Every house is unique; appraisers are trained and licensed for expertise in putting a value on properties.

Appraisers don’t work for the buyer or the seller;  their primary mission is actually to protect the lender who’s risking money against the home’s value.

Appraisers have to weigh factors about the property and location – including size, condition and comparable properties – to appraise its current value.

They know how to focus on conditions that affect value; dishes in the sink don’t; damage and neglect do.

Appraisals lower than the proposed purchase price can affect transaction details. The seller might have to lower the price

or the buyer might have to increase down payment or fund additional escrow.

Appraisal seems a lot like inspection, but they’re not the same.

You can think of it this way:

Appraisers report on value to the lender

Inspectors report on condition of the house and major components to the buyer.

So – expect both appraisal & inspection in your transaction.

What Does The Closing Process Involve When I Sell?

 

As this video explains, a signed sales contract doesn’t mean your house is sold. There are still financial, contractual and legal steps for both sides.

The buyer has to get financing to meet the contract terms – which includes credit checks.

The property is inspected and appraised; title insurance and escrow accounts are set up while you locate new housing, pack and move. And take care of any obligations like painting or repairs. After the contract is signed, it can take a month or more of closing steps to reach the closing meeting.

So plan on that when you plan to sell.

I’m Buying A Home From A Foreign Seller: How Does FIRPTA Affect Me?

I’m Buying A Home From A Foreign Seller: How Does FIRPTA Affect Me?

In normal circumstances, buying a home can be a stressful experience. However, when you add in a seller who’s not a United States citizen, it can become even more complicated. To make your real estate transaction go off without a hitch, learn a little bit about the Foreign Investment In Real Property Tax Act (FIRPTA) and what it means for you when you buy a home from a foreign seller.

Explaining FIRPTA

Often abbreviated as FIRPTA, the Foreign Investment In Real Property Tax Act, requires that U.S. buyers purchasing a property from a foreign seller withhold 10% of the sales price as a “tax”. As a buyer, it is your responsibility to identify whether the seller is not a U.S. citizen and subject to the FIRPTA withholding. Failure to comply means that you, as the buyer, could be responsible for the tax.

Since foreign investors in the United States aren’t taxed on most capital gains, requiring the buyer to withhold 10% of the sales price on the seller’s behalf helps ensure that the United States government receives the tax revenue. Without this withholding, the government would have no way to collect this revenue since foreign investors could simply leave the country without paying it.

Buyers will need to report the 10% withholding to the IRS by the 20th day after the date of transfer. If it’s later found that the foreign seller didn’t actually owe this 10% in taxes, he or she can file a tax return with the IRS and wait for a refund.

How A Title Company Can Help You Understand FIRPTA

If FIRPTA sounds confusing, it’s because it is! U.S. tax codes can be quite complicated, which is why it’s important to partner with someone who understands just how FIRPTA and other tax regulations can affect home buyers. Many real estate professionals do have a basic understanding about FIRPTA, especially in a location where foreign real estate transactions are common. However, there are a number of variations that can exempt a buyer from withholding funds for FIRPTA, so it’s vital that your title company and real estate agent are knowledgeable about all the guidelines and exceptions.

If you’re not sure whether you should worry about FIRPTA, talk to an experienced realtor or title company, such as Title Junction. We can help ensure that you’re complying with the strict FIRPTA regulations so that there’s no surprise.

Title Junction offers classes concerning a number of real estate topics, including FIRPTA, HUD1, title commitment and policies, signature requirements and title order process and basics.  Call to schedule your class today!

Understanding Real Estate Title Insurance Terminology

Like any industry, the title insurance business has a lingo all its own.  The Florida and Cape Coral real estate title insurance agents at Title Junction can walk you through anything you don’t understand and explain any unfamiliar terms to you.  But it always helps to do a little research on your own, which is why we’ve compiled a short list of some of the most commonly used title insurance terms.

Basic Definitions To Know

One thing that is often confused is the difference between a real estate title and a property deed.  Often referred to as “holding title to a property”, a Title provides you with legal use and possession or ownership of the property.  However, it is not a physical piece of ownership evidence; that is the Deed.

Title Insurance, itself, is an indemnity or loss-prevention insurance policy that protects the buyer from legal defects in the title that occurred prior to taking ownership of the property.  In cases where a mortgage is taken out, two title insurance policies will be issued: An Owner’s Policy for the homeowner and a Lender’s Policy, or mortgage insurance, for the mortgage lender.

Understanding Other Terms

You may hear or see the word “ALTA” as you go through the title insurance process.  ALTA stands for American Land Title Association, which is the leading trade association of title insurers. 

Another commonly used term is Escrow.  Escrow has many different meanings, depending on how it is being used.  As it relates to title insurance, it refers to the funds that you provided as earnest money when you made the initial offer on the property.  Those funds have been sitting in a special account set up by your escrow holder, often the title company.  The Closing, which is the final meeting between the buyer, the seller, the lender, title agency, realtors and possibly lawyers where property ownership is transferred.

The Title Report

One of the main duties of a Fort Myers title insurance agency like Title Junction is to conduct a Title Search on the property in question.  A Title Search is an in depth check of public records to make sure the property is legally available for sale and there are no encumbrances or liens against it.  This also shows the ownership history of the property, including mortgages and liens against it.

A Lien is a financial claim to the property.  It may be a mortgage, mechanic or contractor lien or court judgment.  Liens generally must be paid off before a mortgage lender will allow the property sale to take place.  A property may also have an Encumbrance, a legal interest in the land that may affect its value.  Encumbrances could be easement rights, zoning ordinances, claims or liens, unpaid taxes or restrictive covenants.  Encumbrances do not restrict the sale of the property.

The best way to ensure you are comfortable with these terms is to speak with your title agent.  Title agents use these terms all the time and can explain exactly how each is relevant to your personal transaction.  An open relationship with your title agent will ease any pre-closing anxiety you may have.