Sep 22, 2018

The Anatomy of a Real Estate Closing

The closing process varies and fluctuates from property to property, from state to state, from person to person. Just like homes are different, so are closings on those homes.

However, real estate closings in Texas follow a consistent outline of steps from start to finish. They don’t always follow a straight path. Some steps are rigid requirements while others are more flexible guidelines. Some of the steps take place simultaneously while other steps cannot be taken until a previous task is completed. Some steps are short and others are long and complicated.
From the time you complete your sales contract until the title transfers between owners, here are the basic steps of a Texas Real Estate Closing:
  • Contract – The signed, completed and executed contract is delivered to the title company by the agents.
  • Earnest money – The amount specified in the contract is deposited with the title company specified on the contract.
  • Inspections – Buyer does their due diligence and conducts inspections of the property before the option period ends.
  • Information exchange – Title company, buyer, seller, and mortgage company exchange information needed for the sale.
  • Title search – Title company researches property records and more.
  • Mortgage company – Buyer secures their lender and has their loan approved.
  • HOA resale certificate – If there is a homeowners association, the resale certificate and rules and restriction documents are ordered and delivered to all parties.
  • Appraisal – A professional appraisal of the property is performed if required or desired.
  • Survey – An existing survey is supplied by the seller and approved by the title company or a new survey is done.
  • Title documents – The title commitment, tax certificate, property restrictions, etc. are delivered to the buyer and their lender for review.
  • Contingencies removed – Contingencies to the contract in addition to issues on the title are addressed and removed.
  • Get clear to close – The go-ahead to close the sale, given by both lender and title company.
  • Schedule closing – Time set up to sign closing documents.
  • Final walk through – buyer takes a final look at the property to confirm condition and acceptance.
  • Signing – Buyers and sellers sign documents to consummate the closing.
  • Fund – after all documents are signed, reviewed and approved, lender sends funds to the title company who then disburses funds to all parties.
  • Get keys and possession – after funds are processed, buyer gets keys to property.
  • Deed recorded, records filed – Title company files the deed(s) in court records and records the transaction.
  • Title insurance policy issued – Title company issues a title insurance policy to buyer/lender.
The nice neat drawing provided at the top of this story represents the process from the beginning to the end of the sale. However, this graphic shows a more realistic view of how it all happens.

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Sep 8, 2018

The 2 Types of Title Insurance

When it comes to Texas title insurance, there are two kinds of title policies. Most folks don’t realize it because there are so many figures and fees on their closing documents. It’s easier just to lump the title premiums together and ignore the details.

Loan Policy

This is also called a lender’s policy. It protects the lender’s interest in the property until the mortgage is paid off. Lending institutions require this title insurance when issuing a mortgage or refinancing a property.

A Loan Policy covers unrecorded liens, title defects, fraud, encumbrances, access rights, and more. It gives the lender protection to ensure that their mortgage has priority over other liens, and that their lien is valid and enforceable.

A loan policy covers up to the amount of the loan and decreases as the mortgage debt is reduced. The loan policy doesn’t protect the owner’s equity in the property. So, if you purchased a home for $500,000 and financed $300,000 of the price, then the lender’s policy would be for $300,000. If a valid ownership claim was made, the title insurance could cover the lender losses up to $300,000.

In most residential real estate transactions, the homebuyer has additional interest in the property. The second type of title insurance helps protect that buyer’s investment.

Owner’s Title Policy

A separate owner’s policy safeguards the rights and interests of the homebuyer. It covers the buyer’s equity in the property up to the face amount of the policy – which is typically the purchase price. This title policy stays in effect for as long as the buyer or their heirs own the property.

The owner’s policy protects the owner from the covered risks listed in the policy and will pay valid claims and legal defense costs to defend a claim against title to the property. Examples of policy coverage include errors, previous judgments against the property, forgery, defective records, incorrect signatures, and more.

An owner’s policy doesn’t include an increase in your property’s value. It only covers the owner up to the value of the property at the time they bought the title policy. If a homebuyer wants an endorsement to add an increase in value to their policy, that can be discussed with the title company prior to closing.

Who pays the title insurance premium is negotiable. In Texas, the buyer typically pays the smaller Loan Policy premium and the seller pays the higher Owner’s Policy premium. Like the loan policy, the owner’s policy is issued at the time of purchase for a one-time fee. The cost of the policy is usually included in the closing costs.

Prior to issuing any title policy, the title company will conduct a thorough search of the property’s title history. Obtaining title insurance doesn’t guarantee that the homebuyer will never have a title problem. But it does ensure that the homeowner and their lender will have coverage if problems do arise.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.
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Aug 31, 2018

Annual Report on DFW Title Companies

Texas Department of Insurance (TDI) recently released the 2016 Title Agent Statistical Report. Yes, this is now the summer of 2018, so those stats are a bit dated. What can I say? It’s a government agency.
TDI licenses and oversees all title agents in Texas. Our state’s title insurance business is highly regulated and title companies are audited at least every 2 years. Every agency must account for every dime they take in and every dollar they spend.
Take a glance at this 326-page report and you can see why it could take months to compile this information. The report covers every title agency’s income, expenses, and losses. The majority of title companies on the list are Independent Agents. The others are either Affiliated Agents or Direct Operations.
For each agency, they disclose their income, which consists mostly of the amounts they collected in title premiums. In the expense column, you can see how much in total salary they paid their employees and how much the owner/partners were paid. Other details of expenses like rent, utilities, postage, telephone, courier fees, and office supplies are included.
The expense I find most interesting is item No. 54 on each expense list: Fines or penalties. Yes, indeed. You can see who has been good and who has been bad. I’m relieved to see my own company has a big zero in that category. Keep in mind that some of these agencies are small ‘mom and pop’ operations while others are large, multi-branch companies. I totaled just over 100 D-FW agencies with no fines or penalties and 11 with some amount of fine or penalty.
Congratulations to these D-FW area companies without any fines or penalties in 2016:
Independent Agencies: Advantage Title, Affinity Title, Alamo Title, Allstar Title, Allegiance Title, Alliance Title Group, American Title Assurance of Texas, AW Title of Texas, BCHH Title of Texas, Benchmark Title, BNT of Texas, Brahama Title & Escrow, Capital Title of Texas, Carlisle Title, Carrington Title Services, Chapin Title, Chronos Title Solutions, Community National Title, Consolidated Lender’s Resources, Contemporary Solutions-USA, CSP Texas Joint Venture, Decatur Title Company, Designated Title.
Ellis County Abstract and Title, Empire Title Company, Equity National Title & Closing Services, Excel Title Group, Fair Land Title Company, Fair Texas Title, Federal Title, First Rockwall Co, First Title & Escrow, First Western Title Acquisition, FNC Title Services, Freedom Title, Gainesville Title Company, Global American Title Agency, Grand Title Company, Grayson County Title Company, Green Brick Title, GRS Title Services, Inspire Closing Services of Texas, Kane Title, Kensington Vanguard National Land Services of Tx, Lakewood Title, Legacy Pioneer Title, Legacy Texas Title, Lenderlive Title Agency, Lenders Title Solutions, Linear Title & Settlement Services, Luna Buyer.
Madison Title Agency, Maverick Title of Texas, MCS Long Star Solutions, Members Title, Meridian Title, Milestone Title Agency, Miller Title, Mortgage Connect of Texas, National Assurance Title, Navy Federal Title Services, Nexbank Title, North Texas Title of Hunt, Paradise Settlement Services, Prima Title, Providence Title, PTS-Texas Title, Ranger Title, Rattikin Title Company, Reltco, Secured Title of Texas, Sentinel Title Company, Sewell Title, Signature Pioneer Title, Silver Star Title, Superior Abstract and Title, Texas Capital Title, Texas Premier Settlement Services, Texas Secure Title Company, Thomas Title & Escrow Tx, Tiago Title, Timios, Title Source, Title365 Company, Transtar National, True Concept Title, Unisource Information Services of Texas, United Lender Services of Texas, Vantage Point Title, Westminster Abstract Company, Worth National Title Agency and Xome Settlement Services.
Affiliated Agents & Direct Operations: Chicago Title Insurance Company, Commonwealth Title of Dallas, Dominion Title of Dallas, HMH Title Company, Landon Title Company, Millennium title Company of North Texas, NETC Title Company, North American Title Company, Novare National Settlement Service, PGP Title, S&S Title Company, Strategic Title Company, Title Clearing & Escrow, Titlevest Agency of Texas, Titlevision Texas, and WFG Lender Services.
After the scandal at Millennium Title, it’s surprising to see them on the nice list instead of the naughty list. We’ll need to check the next year’s report for that.
Don’t see your favorite company on the good list? That’s because there were a few rule breakers disclosed amongst our D-FW area companies. Their 2016 fines range from $33 to $3,825.
If you’ve got a desire to see your favorite title company’s financial statement, here is the report 

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