At Cascade Title Company, we strive to make the process of buying and selling real estate as easy as possible for our clients. Obtaining Title insurance and using the Escrow process in closing your real estate transactions are important steps in securing the purchase of your home. To get a better understanding of the Title and Escrow process and why you need it, read through this list of frequently asked questions:
Why do you need Title Insurance?
What does title insurance protect?
What is Escrow?
Who usually pays for what?
What is the escrow process?
Why do you need Title Insurance?
Title insurance protects the most important investment you may ever make — the investment in your home. A lender goes to great lengths to minimize the risk of lending you the money you need to buy a home. First, your credit is checked as an indication of your ability to pay back the loan. Then, your lender goes a step further and makes sure that the quality of the title to the property you are about to buy, and which you will pledge as security for the loan, is satisfactory. The lender does this by obtaining a lender’s policy of title insurance. The lender’s policy doesn’t protect you. That’s why you need an owner’s policy, which can be issued at the same time as the lender’s policy for a nominal one-time fee.
Title insurance will pay for defending against lawsuits attacking your title as insured, and will either clear up title problems or pay the insured’s losses. For a one-time premium, an owner’s title policy remains in effect as long as you, or your heirs, retain an interest in the property. Owner’s residential title insurance, issued simultaneously with a lender’s policy is the best title insurance value you can get. Title insurance gives you the peace of mind in knowing the investment you’ve made in your home is a safe one.
What does title insurance protect?
Here are a few situations in which Title Insurance can protect you:
- False impersonation of the true owner
- Forged deeds, releases or wills
- Undisclosed or missing heirs
- Instruments executed under invalid or expired power of attorney
- Mistakes in recording illegal documents
- Misinterpretations of wills
- Deeds by persons of unsound minds
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes
- Fraud
What is Escrow?
Escrow is a method of closing a real estate transaction in which all the required documents and funds are placed with a third party for processing and disbursement. It is the job of the escrow officer to conform to the laws of the state and act as a non-biased third party in order to close the transaction fairly and legally. At Cascade Title Company, we pride ourselves on the fact that our escrow officers have all earned an L.P.O. (Limited Practice Officer) designation for the state of Washington.
Who pays for what?
While every transaction can have individual conditions, there are certain things which the buyer and seller have traditionally paid for.
The seller can generally expect to pay for:
- Owner’s title insurance premiums
- Real Estate Commission
- Half of the escrow fee (except for VA Loans, where entire fee is paid by the seller)
- Any loan fees required by the buyer’s lender, per their contract
- Payoff of all loans on property (unless loan balance being assumed by buyer)
- Interest accrued to lender being paid off, statement fees, reconveyance fees and any prepayment penalties
- Termite inspection (according to contract)
- Termite work (according to contract)
- Home warranty (according to contract)
- Any judgments or tax liens against the seller
- Recording charges to clear all documents of record against the seller
- Prorated taxes (for any taxes unpaid at time of transfer of title)
- Any unpaid Homeowner’s Association dues
- Any bonds or assessments (according to contract)
- Any and all delinquent taxes
The buyer can generally expect to pay for:
- Lender’s title policy premiums
- Half of the escrow fee (except for VA Loans, where entire fee is paid by the seller)
- Document preparation (if applicable)
- Notary fees (if applicable)
- Recording charges for all documents in the buyer’s name
- Homeowner’s Association Transfer Fee
- All new loan charges (except those required by lender for sellers to pay)
- Interest on new loan from date of funding to 30 days prior to first payment date
- Assumption/change of records fees for takeover of existing loan
- Home warranty (according to contract)
- Fire insurance premium for first year
- All pre-paid
What is the escrow process?
Tasks typically performed by each party in the escrow process:
The Seller:
- Deposits the executed deed to the buyer with the escrow closer.
- Deposits evidence of pest inspection and any required repair work.
- Deposits other required documents such as tax receipts, addresses of mortgage holders, insurance policies, equipment warranties, or home warranties.
The Lender (if applicable):
- Deposits the proceeds of the purchaser’s loan.
- Directs the escrow closer on the conditions under which the loan funds may be used.
The Escrow Closer:
- Opens the order for title insurance.
- Obtains approvals from the buyer on the title insurance report, pest, and other inspections.
- Receives funds from the buyer and/or any lender. Prorates insurance, taxes, rents, etc.
- Disburses funds for title insurance, recordation fees, real estate commissions, lien clearance, etc.
- Prepares a final statement for each party, indicating amounts to be disbursed for services and any further amounts necessary to close escrow.
- Records deed and loan documents, delivers the deed to the buyer, loan documents to the lender, and funds to the seller, closing the escrow.
Once all the terms and conditions for the instructions of both parties have been fulfilled, and all closing conditions satisfied, the escrow is closed, and the same and accurate transfer of property and money have been accomplished.
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