Many terms in real estate are relatively easy to understand or figure out like “Listings” or “Inspection” or even “Pre-Approval Letter.” When you have finally navigated through the often times complex journey of finding a home, negotiating a deal and arrive at the closing table, you will hear a lot of title talk and may need some clarification on common yet confusing title terms. We’ve put together a glossary of the most common terms you will hear and explain what they mean so you can get through your closing like a pro.
The closing disclosure is a five-page document that must be provided to the buyer three business days before closing. The Closing Disclosure outlines all of the costs associated with the mortgage. Typically, this document will include the loan terms, your projected monthly payments, and how much you will pay in fees and other closing costs.
A cloud on title refers to an outstanding claim on the title to the property. These claims can include an old mortgage or deed of trust with no recording showing the secured debt was paid off, a failure to transfer all interests in the property to a previous owner, a former deed which was improperly written or signed, an unresolved legal debt or some other questionable link in the chain of title.
A legal written agreement between the buyer, seller and escrow agent. An escrow agreement defines the arrangement by which one party deposits an asset with a third person (called an escrow agent), who, in turn, makes a delivery to another party (the beneficiary) if and when the specified conditions of the contract are met.
Also known as a title search, the title examination is an investigation made into the title of the property on behalf of the buyer to ensure a clear title can be obtained. During a title examination, the title examiner will review past deeds, wills, and trusts to make sure the title has passed correctly to each new owner. The examiner tries to confirm that all prior mortgages, judgments, and other liens have been paid in full.
A judgment is an official decision rendered by the court with regard to a civil matter. The creditor can use the judgment to place a judgment lien on the seller’s property. At that point, a seller must handle the judgment, generally by repaying the debt before he or she can sell, trade or transfer the property.
If you hear that there is a lien attached to your property, a creditor is making a claim you owe it money. Liens on real estate are a common way for creditors to collect what is owed to them. A property lien must be filed and approved by a county records office or state agency. Typically, a lien is the creditor’s first step to seize the property. To clear title, you must pay off the lien.
Most lenders require a Loan Policy when they issue you a loan. This Policy is based on the amount of your loan. The loan policy protects the lender’s interests in the property should a problem with the title arise.
The owner’s policy is optional but recommended. This policy is purchased by the buyer for a one-time fee and protects a homeowner’s investment in a property for as long as they have an interest in the property. If an issue that is covered on the title should arise that was not found during the title search (omissions in deeds, mistakes in examining records, undisclosed heirs) the homeowner is protected.
When title is recorded it appears in the public records. The purpose of recording the deed is to give “notice ” that you are now the owner of that particular piece of real property. Recording also allows you to track the chronological chain of title. If an individual would like to know who has ownership of a property, they are able can check the records of the county recorder for the county where the property is located.
Survey’s are often required by the lender. This is to ensure the property is worth the amount that they are insuring it for. A survey is done to reveal the exact property dimensions, size and location of the home on the property. The survey will also list any other improvements on the land. This could include something like a driveway that may be crossing a property line.
Title Insurance protects your “title” or “ownership” of the property. Most other types of insurance protect you against claims for past occurrences rather than issues that could occur in the future. Common types of claims include errors in the public record, undiscovered Liens, omitted Heirs, and fraud.
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