Recordation, Title Insurance, & Settlement Flashcards
Public Recording System - Keypoints
- state laws determine policies & procedures that regulate recording; also determine responsibility for organizing & maintaining recorded documents
- recording a document does not provide validity
Recording Process
5 steps…
- Note date & time the doc is filed.
- Assign recording number.
- Copy doc into publlic record (photocopy/digital image).
- List doc in grantor & grantee indexes.
- Return original doc to indicated party.
System Allowances
- allows users to post claims
- gives constructive notice
- establishes priority of interests (1st in time, 1st in right)
- grantee who does not record deed rishs having another claim title to property
- creates position for doc base on recording date & time
- allows users to search claims
- inspect property for actual notice & visible claims
- inspect public records for contructive notices (liens)
- buyer’s due diligene to inspect property and public records.
Requirements for Recording
- Docs usually recorded:
- deeds
- mortgages/trust deeds
- contracts for deed
- easements
- long-term leases
- recorded docs should be executed (signed)
- some states require notarization/acknowledgement
- paying recording fee & transfer tax (refer to state law); typically paid when recording the deed
Subordination
- clause in mortgage/deed or trust in which lender permits a subsequent mortgage to take/change position for priority.
- allows mortgage to maintain original position
- previous mortgage refinanced? secondary mortgage continues subordinate position
Marketable Title and How to Determine
- ownership free from reasonable doubt; buyers goal is to obtain marketable title.
- to be marketable, must:
- disclose no serious defects
- not expose purchaser to litigation or threaten the quiet enjoyment of property
- convince purchaser they could sell or mortgage the property at a later time
- any questions of marketable title have to be raised before acceptance of the deed
Title Search
Process & Purpose
- examiner reviews public records pertaining to property
- search is from the present to original source of title
- process used to establish chain of title (successive ownership documents linked together); seeking an unbroken chain
- title clouded if errors or missing documents
- seller will need to clear title to convey the property
- marketable title act will determine how far back the search needs to be conducted.
Abstract of Title & Attorney’s Opinion of Title
- ABSTRACT: historical summary of recorded docs affecting title & created through title search
- seller expected to produce updated abstract
- buyer’s attorney examines and determines marketability
- attorney renders opinion of title after tracing chain of title
- shows current status of rights
- lists objections
- a.k.a. certificate of title
Title Insurance
- contract that protects policyholder from losses arising from defects in the title; protects the insured from an event that occured before policy was issued.
- beset method for determining marketable title
Title Insurance - Process
After examining the public records, title company will:
- issue title report (current condition of title) and commitment (execptions/defects/encumbrances not included in policy)
- buyer can offer objections prior to closing
Standar Coverage Title Ins. Policy
- protects against all problems found after closing; excludes exceptions found before closing & listed in title report.
- covers matters of record including:
- errors in title examination
- errors in abstract
- errors in public record (misfiled documents)
- hidden defects (forgery, incompetency, misrespresented marital status, etc.)
Extended Coverage Title Insurance Policy
- protects the same as standard policy does as well as problems not a matter of public record such as:
- parties in possession/adverse possession issues
- matter of survey (encroachments)
- gap period (time between issued commitment date & date deed is recorded)
Types of Insurance Policies
- Owner’s Policy: protects owners/buyers & heirs while they hold interest
- cost based on sale price of property
- paid for by buyer/seller/party listed in contract
- coverage continues until property changes title
- Mortgagee’s Policy: protects mortgagee/lender
- coverage base on loan amount
- often paid by buyer, but seller could pay if in contract
- coverage diminishes with each payment and ceases to exist when loan is satisfied
Suit to Quiet Title
- court hearing to determine ownership, recognize valid claims, & quiet invalid claims.
- used to clear title & est. ownership under adverse possession
- lis pendens is filed & all parties must present evidence of the claim in court
- coourt hears & judge claims
- once court order is recorded, the cloud on the title is cleared
Enivronmental Issues
RE Agent’s Role & Key Points
- Fall under EPA
- RE should know:
- issues common to area
- signs of contamination
- inform & suggest investigation into any EI
- Considered material facts - must disclose
- If broker/agent suspects, must be disclosed
- Broker/agent should suggest inspection, not inspector
- Properties w/high contamination levels may need cleaning before selling can take place
Asbestos
- Building material - can cause respiratory diseases
- Used before 1978 in many bldg materials (pipe, insulation, flooring, siding, etc.)
- Harmful if fibers are friable (broken & airborne)
- Bldg demo’d or reno’d, abatement (removal) done prior to
- Encapsulation (sealing in place) is the best alternative (no exposure to friable fibers)
Lead-based Paint - What it Means
- elevated lead levels can cause neuro disorders; pregnant women & children most at risk
- Fed law requires sellers to disclose if house built before 1 - 1 - 1978
Lead-based Paint - RE Requirements
- RE Responsibility:
- Disclose location of any known LBP
- Provide any reports
- Give EPA pamphlet on lead poisoning
- Offer buyer 10-day option period
- Buyer may waive
- If not waived, buyer may terminate during 10-day inspection period
- Sellers not required to do inspection or removal
- Listing Broker: responsible for having signed acknowledgements from buyer, seller, and RE agents.
- Prop managers/landlords required to give similar disclosure and EPA pamphlet
- Tenant/Renter does not have to be given opportunity to test or have removed
Lead-based Paint - RRP Program of 2010
- Renovation, Repair, & Painting Program
- covers any professionals performing work that disturbs LBP
- Professionals dealing with LBP must:
- be certified in containment & cleanup
- provide owners with Renovate Right brochure before starting work
- prop owners working on personal prop exempt, but must be in compliance if working on rental property
- considered material fact if reno done in violation of this.
Radon
- naturally occuring odorless, radioactive gas
- moves from ground to atmosphere
- creates hazard when trapped in a building
- can cause lung cancer
- impossible to detect w/o testing, done by a professional
- will recommend plan for mitigation (plan to lower levels)
- typically mitigated by adding ventilation systems to move gas out of bldg
Carbon Monoxide (CO)
- odorless gass, byproduct of combustion
- improper vetilation/equipment malfunction can cause a build-up, leaing to death
- can be detected with CO monitor/detector
- many states require this
- inspectors should test for build-up
Mold
- toxic mold created by excess moisture
- can grow anywhere there is water, oxygen, & organic food source
- if found, can be harmful and requires remediation (removal)
- no federal disclosure laws
- buyers can have inspector test for it
- brokers should be aware of indicators (musty smell, water damage, high humidity, water leaks, etc.)
- may not be covered by homeowner’s insurance
Environmental Impact Statement (EIS)
- Describes potential impact of a proposed project on local & regional:
- air
- wetlands
- land
- environment
- mandatory for gov’t projects & poss. required for private development
Real Estate Settlement Procedures Act (RESPA)
- standarizes closing practices for 1 to 4 family res properties financed by federally related loans
- regulates lenders, title companies, & RE licensees
- requires lenders to give GFE (Loan Estimate) of all closing costs w/in 3-business days of application
- requires lenders to give HUD-1 (Closing Disclosure) at closing
- restricts amount of advanced escrow pmts & prohibits kickbacks
Escrow and Closing
- some states use escrow agents for their closings
- some states have closing across the table (NOT TEXAS)
- escrow agent/holder is disinterested party, assists carrying out transaction according to purchase contract
- listing brokerage firm normally responsible for over all closing (NOT TEXAS)
Closing Statement - What is it/What does it do?
- account of each party’s debits & credits
- debit to buyer: anything that increases amt of $ to bring to closing (sales price, brokerage fee, new loan origination fees, etc.)
- credit to buyer: anything that decrease amt of $ brought to closing (earnest money, new loan amount, interest on assumed mortgages, etc.)
- debit to seller: anything that decreases amt of $ they walk with (brokerage fees, owner’s title insurance, payoff of existing loan, etc.)
- credit to seller: anything that increases amy of $ they walk with (sales price)