Information for Buyers/Borrowers
HOW THE TITLE AND ESCROW PROCESS WORKS
TITLE INSURANCE AND ITS IMPORTANCE IN YOUR TRANSACTION
WHAT YOU SHOULD KNOW ABOUT YOUR CLOSING (BUYERS/BORROWERS)
WAYS TO HOLD TITLE IN OHIO
HOW THE TITLE AND ESCROW PROCESS WORKS
Generally speaking,
most title orders come to us via the lender or realtor of either the
buyer/borrower or seller. As title agent, we will commence an
examination of the title of the property and order the necessary
information to complete the closing. The lender will provide to us
what's called "closing instructions" which we will review carefully. If
special conditions are required by the lender to close the loan, we will
make sure the proper steps are taken to fulfill those obligations.
When these matters are completed and reviewed by our staff, we will
notify the buyer, either directly or via the realtor or lender who
placed the title order, to arrange a time to close the loan. We will
also advise the buyer of any funds he or she may need to complete the
transaction. The buyer must WIRE these funds. In addition,
the buyer must bring a valid, government-issued picture I.D. with him or
her to closing for proper identification. We cannot close a transaction
without this I.D. Click on "directions" to find directions to our
office for your closing.
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TITLE INSURANCE AND ITS IMPORTANCE IN YOUR TRANSACTION
Real estate title
insurance, very simply, is an insured statement of the conditions of
one's title or ownership rights to a certain piece of real estate. The
policy guarantees that the property being purchased or mortgaged is free
from undisclosed liens or rights and it guarantees additionally that any
confusion as to rights of ownership will be resolved in favor of the
party owning the real estate or the title insurance company will be
liable for loss in value to the policyholder up to the policy limits.
A buyer purchasing real estate and closing with the settlement agent/
escrow company is normally obtaining an owners policy of title insurance
as provided through the purchase contract.
For example, you decide to purchase a house in Ottawa or Erie Counties
are obtaining a mortgage to help you finance the purchase from a bank or
mortgage company. That institution will require an examination of the
title to the property and have the party reviewing the title issue to
them a lender's policy of title insurance insuring that the property is
or will be owned by the purchaser and that there are no defects, liens
or encumbrances on the property which would adversely affect the
marketability of its mortgage.
The owner's policy of title insurance insures that the owner has good
marketable title to the property free of any encumbrances or liens that
would adversely affect the property, except those made known to the
buyer, and insures to the owner that if any such liens, encumbrances,
defects or other title problems become known the title insurer will
defend the buyer's title to the property.
We recommend the purchase of the title insurance for some very simple
reasons. First, the premium for purchase of the title insurance policy
is a one-time charge. Since the purchaser is usually borrowing money to
finance the purchase, the majority of the cost of the title insurance
policy that the owner would receive has been paid through the premiums
for the lender's policy which is required by the loan.
Even though the buyer may be asked to pay for the lender's title
insurance protection, the lender's policy of title insurance does not
protect the buyer and a claim can only be made if the lender suffers a
financial loss because of a title defect that adversely affects a
foreclosure of the buyer's mortgage. There have been many of defects in
titles which could not be revealed by an examination of the public
records. These defects usually arise at a time after the transaction has
taken place and purchasers can suffer significant losses as a result of
them. That is why owner's title insurance makes a great deal of sense.
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WHAT YOU SHOULD KNOW ABOUT YOUR CLOSING (BUYERS/BORROWERS)
The following will likely be required by your lender on or before closing:
1. HOMEOWNER'S INSURANCE. A homeowner fire and
extended coverage insurance policy or binder for such insurance either
in an amount at least equal to the total of all new mortgages on the
property or 100% of the replacement cost most likely be required by your
lender.
2. FLOOD INSURANCE. If the premises is located
within a specially designated federal flood hazard area, then flood
insurance will be a mandatory requirement and you'll be required to
purchase a flood insurance policy. Your lender will notify you if this
requirement pertains to you and your property before closing.
3. TITLE INSURANCE. The lender usually requires that
they be provided with a lender's title insurance policy (loan policy) to
protect their interest in your property up to the amount of the
mortgage. While the premium for the loan policy is included in your
closing costs, it does not protect you. Your ownership interests are
insured only by an owner's title insurance policy (owner's policy).
While the lender's coverage under the loan policy decreases as the
mortgage is paid down and terminates when the final payment is made,
your owner's policy remains in effect for as long as you and your heirs
own the property. The owner's policy is available for a one-time
premium and at a discounted rate if purchased simultaneously with the
loan policy at the time of closing.
The owner's policy provides coverage for numerous matters which are not
covered by the standard attorney's opinion of title and which are not
discoverable by searching the land records. Typical examples of such
matters include forged documents, the incapacity of a grantor,
undisclosed or missing heirs, missing signatures, mistakes in recording,
unknown creditors and problems involving access to the land.
4. MANNER IN WHICH TITLE WILL BE HELD. Generally
speaking, there are two ways to hold title in Ohio. Please read the
section below entitled "Ways to Hold Title in Ohio" to familiarize
yourself with these concepts.
5. WATER, SEWER AND ELECTRICITY. You should follow
up with your sellers to make sure all parties are in agreement and
fulfilling their obligations with regard to final water, sewer and
electricity readings, if applicable.
6. OTHER REQUIREMENTS. If the mortgage involves a
condominium unit or a property that is not a one-to-four-family
dwelling, you may be required to fulfill other requirements.
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WAYS TO HOLD TITLE IN OHIO
The following information is intended only to give a brief description
of the two most common ways of holding title in Ohio and is not provided
for the purpose of advising how to take title. If further information
is desired you should seek legal counsel from your attorney or retain an
attorney for advice on these matters.
In order to properly prepare the mortgage documents we require
information from you as to how you intend to take title to the real
estate. The two most common ways two or more persons may hold title to
real estate are: (1) TENANTS IN COMMON, and (2) JOINT TENANTS WITH RIGHT
OF SURVIVORSHIP (also known as "Survivorship Tenancy." )
Tenants in Common: Each owner has an undivided, fractional share of the
property, the shares of which may be equal or unequal. Regardless of the
size of an individual's share, each tenant in common enjoys full
ownership of his or her share, and can sell, mortgage, use, or dispose
of it as a full owner. On his or her death, the tenancy passes to heirs
or to those named in the tenant-in-common's will. If partition is
ordered, the property may be physically divided and a fee simple portion
given to each tenant in common, or the property may be sold as a unit
and the proceeds divided among the tenants in proportion to their
respective shares.
Survivorship Tenancy: A survivorship tenancy is similar to tenancy in
common, except that joint tenants have a right of survivorship. That is,
when one joint tenant dies still owning his or her share, the share
passes automatically to the surviving tenant(s). Thus, a survivorship
tenancy cannot be transferred by will, as the nature of this form of
ownership is that it automatically passes to the survivor(s). The right
of survivorship also may be ended where, for example, all joint tenants
transfer or convey their interest. In most states, the right of
survivorship is automatically created when a joint tenancy is created.
In Ohio, however, the right of survivorship must be specifically
described in the document that creates it.
Source: The Law and You, (c) The Ohio State Bar Association and The Ohio
State Bar Foundation.
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