May 17, 2018

What is a Title Search?

Title companies are like the private detectives of real estate. That’s right. We’re like a combination of Sherlock Holmes and James Bond. Only without the guns and fast cars. Well, maybe we’re closer to a mixture of Nancy Drew and the tech nerd in the back of your office. But we still help save you from real estate disaster.

One of the reasons title companies are so essential is the title search they perform. A real estate title search involves collecting documents and evidence of the history of a property. The purpose is to ensure the title is clear and valid, and to answer questions regarding a particular piece of real estate prior to the transfer of the title.

A title search generally includes research and thorough examination of deeds, tax records, maps and plats, court records, mortgages, liens, abstracts of judgement, probate actions, divorce cases, etc. It can also include searches related to easements, covenants, restrictions, unpaid taxes, assessments, life estates, bankruptcy or legal proceedings, … all kinds of issues that affect the property and may impact ownership.

We look for any recorded documents about the property and records that name the parties involved to confirm the seller legally owns the property and that no one else can claim full or partial ownership of it. The collected documents are analyzed by the title company to see how or if they affect the property.

A title search is done before a title company issues a commitment for title insurance. The commitment is a short summary that addresses any issues regarding the title. Before issuing title insurance for a property, the title company wants to safeguard that the title to a property is legitimate. This is designed to protect the buyer and their lender against lawsuits or claims against the property that result from disputes over the title. If the buyer is getting a mortgage on the property, their lender will require a title search and title insurance. Everyone wants to feel secure in knowing that once they’ve purchased real estate, they are the rightful owner of that real estate.

Anyone can do a title search if they have the knowledge and resources. Most documents regarding the transfer of land are public record and are kept at a government office or county courthouse. Hard paper copies or digital files come from various books and volumes that are recorded by date. They include official land records or documents like deed records, mortgages, liens against the property in favor of a creditor, vendor or tradesman, etc.

The title company creates an abstract of title from the information gathered. The abstract of title is not a public record. Unless you are trained and experienced in producing an abstract of tile, it’s suggested that you don’t try this at home. It’s usually better to put your real estate matters in the hands of the professional title detectives.
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May 14, 2018

Best Days for Closing on a House

One of the quirks of the title industry is the roller-coaster pace of business. A week day in mid-January can be as boring as watching paint dry. The last Friday of the month in the summer feels like bungee jumping into fire.

While title companies are generally glad to close a transaction, some days are a lot more welcome than others. The last day of the month is usually the busiest time for title companies and lenders. Fridays are the fullest days of the week. I’ve suspected that mortgage companies were pushing for these days to close out their month or week with more business. But that is probably not correct.

“A purchase transaction closing date is typically driven by the agreed upon date in the contract,” says Kyle Trafton, Director of Mortgage Services at Inwood Mortgage Group. So, it’s the real estate agents to blame for our closing days running so hot and cold? Apparently not. “We see many closings happen towards the end of the month to minimize daily per diem interest on the new loan, therefore reducing the buyer’s cash to close,” Trafton adds. “Additionally, if a buyer is currently renting a property, leases run through the end of the month, and they may be attempting to minimize duplicate days of rent expense and interest on the new loan.”

Well that makes sense. FHA loans can add an even greater factor in the interest expenses depending on when they close in the month. If as a buyer or seller, you want special time and attention during your closing, avoid the last day of the month. You’ll also have more choices for closing times if you steer clear of Friday deadlines. Try to schedule your closing on a Tuesday or Wednesday during the middle of the month to give your transaction the most time and consideration.

When it comes funding your transaction, morning closing times are best. There are a lot of steps that need to happen between the signing and the actual funding and finalizing of the deal. Much of the work is done electronically, but they are all driven by humans who must sort, send, read, code, crosscheck, file, etc.

“We try to tell folks to finalize the closing by 3 o’clock at the latest,” advises Trafton. That usually means both the seller and the purchaser getting a mortgage should start their closing earlier to allow signed documents to be reviewed before the deal is complete.
“If it’s a purchase transaction, the documents have to be sent to the lender for funding and to allow time for review,” he says. “There may be multiple parties involved.”

No one wants to be that about-to-be-new-homeowner waiting for the keys to the house on a Friday afternoon with the moving van idly parked out front. And no one wants to be the escrow officer or agent telling them that they aren’t getting the keys until Monday because they’ve missed the wiring deadline, or the deal hasn’t funded yet. I’ve been there and it’s a 5 o’clock unhappy hour.

Help us create a calmer environment for all parties involved by scheduling your closing day and time to allow enough time for your transaction paperwork to be processed. It makes for happier moving days.
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May 10, 2018

New Texas rules regarding Escrow Money

The Texas Real Estate Commission (TREC) recently updated the standard residential contracts to now address policies regarding deposits of earnest monies. These changes become mandatory May 15, 2018.
On the first page of the newly updated Texas contracts, it states that “Within 3 days after the Effective Date, Buyer must deliver $___ earnest money to ___, as escrow agent, at ____.”  Previous TREC contracts did not have a deadline for delivering earnest money except to say it was due “upon execution of this contract.” Simultaneous delivery of the contract and earnest money didn’t always happen. Now it is clear.
The changes also include these words:
“If Buyer fails to deliver the earnest money win the time required, Seller may terminate this contract or exercise Seller’s remedies under Paragraph 15, or both, by providing notice to Buyer before Buyer delivers the earnest money. If the last day to deliver earnest money falls on a Saturday, Sunder, or legal holiday, the time to deliver the earnest money is extended until the end of the next day that is not a Saturday, Sunday, or legal holiday. Time is of the essence for this paragraph.”

Those bold letters are in the contract, not my addition. The same wording was added to the condo contract form, vacant land form, and new construction.

When it says ‘time is of the essence,” it means we’re not kidding. Don’t miss this deadline or you’re in trouble. The seller’s remedies under Paragraph 15 include all kinds of unpleasant things that a buyer doesn’t want to tackle. Things like ‘specific performance’ and liquidated damages.

Keep in mind that earnest money must be delivered to the title company in the form of funds that will be accepted. You’ll need a wire transfer, cashier’s check, certified check, money order, personal check, or cash. All checks must be cleared before the amount becomes ‘good funds.’

If a third party deposits the earnest money on the buyer’s behalf, they must sign a Third Party Deposit form. The buyer’s lender can be informed of who made the earnest money deposit and the third party must acknowledge that they are not placing a lien against the property to secure re-payment of the funds. If the deal falls through, the third party doesn’t get the earnest money. The buyer or seller are the ones who receive the earnest money.

You know these kinds of changes wouldn’t be made and these rules wouldn’t apply if there weren’t incidents where things have gone wrong, an innocent party has lost money or similar disputes keep popping up in court.

When it comes to earnest money, remember that the title company and escrow agent are a neutral authority with duties to both buyer and seller. They follow the instructions of the contract. Get your earnest money to the title company with care and timeliness.

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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