What Is Title Insurance?
Title Insurance is unlike other types of insurance in that it looks back rather than forward. Title Insurance Policies indemnify the insureds for defects in the title to real estate occurring prior to the effective date of the policy. The policy pays money to the insureds should there be defects in the title such as a hidden mortgage lien or in the worst case scenario, if the property seller did not actually own the home that was purchased. The mortgage policy insures the lender that their mortgage is a first or senior lien subject only to the exceptions noted in Schedule B in the policy. The owner’s title policy assures the purchaser that they will own the home free and clear subject to the specific exclusions contained in the policy.
Unlike casualty insurance that assumes risks, title insurance is designed to prevent losses via an extensive investigation of prior events impacting the title including judgments and liens against prior owners. For that reason, most of the cost associated with title insurance goes toward the agent’s searching and examining the prior history of events impacting the real estate.
Why Use An Attorney?
The legal documentation necessary for a real estate closing is accomplished by title insurance companies, escrow companies and lawyers depending on the local customs. National studies have concluded that consumers do not pay higher conveyancing costs where attorneys prepare the deeds and closing documentation.
Aside from preparing needed paperwork, the most important reason to retain a lawyer is that he/she has a fiduciary duty to that home seller. This means that the lawyer will exercise independent judgment in protecting the home seller. No other person in the transaction has such a solitary responsibility to the home seller.
Purchasers of real estate should be represented by their own independent lawyer to assure that all of the real estate contract provisions favoring the home buyer are complied with. Lawyers are liable to consumers should they fail to fully represent their clients’ interests so they take these responsibilities very seriously.
In many states it is customary for the home sellers or home purchasers to also perform title examination services for which they are compensated by the title insurer. The consumers’ closing costs are normally lower when a lawyer representing the seller or purchaser accomplishes the title examination than if a third party performed those services.
Why Use A Realtor®?
Sellers of real estate in about 90% of transactions elect to “list” the property with a local real estate agent. Realtor® is a trademark-protected term by the National Association of Realtors but is widely viewed as synonymous with real agent or broker. The Realtor typically works on a commission basis and thereby only gets compensated when the property is sold.
Many of the 10% of individuals who decide to initially sell their home on their own [For Sale By Owner or “FSBO”] subsequently list the property with a realtor who specializes in marketing local homes. Of the FSBO’s that do close, sellers frequently end up accepting a lower purchase price than if the home were listed by a local real estate professional, thus negating the perceived savings from not retaining a Realtor®.
Most recently some “discount brokers” have emerged offering Home Purchasers “cash back” at closing. Typically these agents perform little or no service relying on Internet marketing gimmicks to attract Home Purchasers. Consumers are urged to carefully scrutinize the alleged benefits of cash back at closing schemes that may impact your mortgage application, tax liability and real estate contract terms.
Approximately 10% of local Realtors are successful in the sale of 90% of all homes. This seemingly distorted number is explained by the fact that many Realtors® are part-time and are only involved with the home sales of friends and relatives. Serious home sellers and purchasers should seek out the full time, most successful Top Performers in the local market for the best results.
