Thursday, October 25, 2007

Costs Of Settlement - Title Insurance

Home Sale Services, Inc. (www.homesaleserviceinc.com) has launched a series of articles addressing the costs of real estate settlement. The second article in the series pertains to Title Insurance.

One of the costs of a real estate purchase is title insurance. Title insurance is required by all lenders in Pennsylvania when providing funds (mortgages) to purchase real estate. It insures that the title to the real estate is free from any claims affecting the purchaser’s ownership. It protects the owner, and the lender, from losses incurred by past mortgages and debts, judgments, mechanics liens, divorces, defects in title, documents misplaced in courthouses, boundary line disputes, unpaid taxes, and other concealed problems, like forgery or other frauds.

WHAT IS THE COST?

In Pennsylvania title insurance rates have been set by the state legislature. The premium is generally calculated on the value of the interest, which you are purchasing. An owner’s policy is issued at the time of the purchase of the property and is based upon the full consideration, including the aggregate unpaid principal sum of any mortgages or other liens, claims, taxes and any other municipal charges not being paid. A policy may be issued in an amount in excess of the full consideration where agreed to by the insurer and the insured.

The title insurance rate comes in three varieties. If a property has not had title insurance within the past ten years, the title insurance rate is the “Basic Rate.” A purchaser of a title insurance policy shall be entitled to a less expensive rate, called the “Reissue Rate” if the property to be insured is identical to or is part of property which had obtained title insurance within the past ten years immediately prior to the date of the insured transaction.

There is a third, and lower rate and that is applicable to subdivision or condominium regimes. This rate is employed when title insurance has been issued to a builder within ten years of the title insurance being applied for and the builder sells completed units out of the subdivision or the planned unit development, cooperative or condominium. In this instance, the charge is 90% of the reissue rate. Attached to this article are examples of title insurance rates for properties valued between $250,000.00 and $500,000.00. Home Sale Services would be happy to provide information as to charges below $250,000.00 and above $500,000.00 or any other questions concerning rates. Call 610-489-3656.

SPECIAL TITLE INSURANCE RATES

There are a number of other, less frequently, used rates which apply in particular circumstances. One of those is when a loan policy is to be issued within four years of the date of the previously insured mortgage or fee interest and the premises to be insured are identical to, are part of, the real property previously insured, and there has been no change in the fee simple ownership. If all those criteria are met, and the new loan policy is within two years of the original title insurance issue date, the new policy is 70% of the reissue rate and if it is between two and four years of the original title insurance issue date, it is 80% of the reissue rate.

When a policy has been issued on a construction loan mortgage and within six months from completion of the building, the same mortgagor executes a new mortgage, the charge shall be 50% of the reissue rate, provided that the new policy is being issued by the same insurer which issued the previous construction loan policy.

Title insurance may be issued for a leasehold estate and in that instance, the amount of the insurance must be equal to:

A. The aggregate of the total rentals payable under the lease; or

B. the aggregate of the total rentals for the six years immediately following the settlement or closing of the lease transaction; or

C. a reasonable statement of estimated rents on percentage leases; or

D. the appraised value at the time of insuring the premises as established by an appraiser acceptable to the insurer; or

E. the land and total projects costs of such proposed improvements in the case of proposed construction; or

F. the purchase price of the estate when insuring an assignment of a leasehold estate, including all obligations assumed.

In addition to the basic title insurance rates, all title insurance companies issue endorsements that provide coverage for specialized property issues such as survey exceptions and condominium concerns and most lending institutions require two or three endorsements at every settlement. The endorsements are subject to additional charges to the title insurance applicant (Buyer). Those charges will be the subject of the next article in this series of memos addressing the costs of a real estate settlement.

Home Sale Services, Inc., (www.homesaleserviceinc.com), is a company which writes Agreements of Sale for clients who are not utilizing real estate brokers to handle their sale or purchase of a home. The company specializes in assisting you with the sale or purchase of your home. We charge a flat fee for services rendered. We are not real estate brokers. We are staffed by attorneys and personnel experienced in the home sale industry. We limit our services to Pennsylvania and further to the following counties in Pennsylvania: Montgomery, Chester, Berks, Bucks and Delaware Counties. Home Sale Services provides a professionally drawn Agreement of Sale and the mandatory Seller’s Property Disclosure Statement required by Pennsylvania. The flat fee for this service is $750.00.

About Thomas M. Keenan: Thomas Keenan's educational background includes a J.D. from Temple University School of Law in 1975 and a B.A. from Dickinson College in 1964 and graduate work in English Literature at Villanova University from 1965 to 1966. Mr. Keenan was the Director of the Montgomery Bar Association, term of office 1996-1999 and was an elected member of the Judiciary Committee. He is a member of the Pennsylvania and American Bar Associations and the Municipal Law Section of the Pennsylvania Bar Association. His areas of expertise include corporate, banking, real estate and municipal law.

Basics of Title Insurance

Buying a home is a long process that requires a lot of different things to all come together at one time.

Once you have gotten past one hurdle, you find that there is something else you have forgotten to do or think about in your home buying transaction.

One thing that is commonly cast to the side is the title insurance. When you line up your mortgage and financing, the lender will probably assign a title company to your home, but that doesn’t mean you should just stop there and forget about it all together.

It is important that you research the title company and understand the title process before you proceed so you do not run into problems down the road.

This can save you a lot of time, energy and stress in the long run. A recent article by Bobbie Sage of about.com, “What you need to know about your title insurance company,” discusses some important things that every homeowner should know about title insurance and the company you are working with.

So for all of you out there who are buying a home but do not exactly know what title insurance is, we will explain that first. “Purchasing your home is an important decision. But how does one know that the property they purchased has a clear title? Because unknown problems can be hidden in the history of a property's title, homeowners pay a title insurance company for title insurance.” “Title insurance companies provide title insurance. Title insurance is an insurance policy that guarantees the property title is free from the problems of hidden liens and claims.”

The main job of a title insurance company is to make sure that the title on your home is free and clear, or at least tell you if it isn’t. In most cases, there will be no trouble, but in some instances there will be things found on a title that could cause a lot of problems and trouble for a new homeowner if they aren’t taken care of in advance. “Possible hidden title problems your title insurance company may find can include: Errors or omissions in deeds, Mistakes in examining records, Forgery, Undisclosed heirs, Liens for unpaid taxes and Liens by contractors. Title insurance pays for title companies to search for problems in a property's title by examining public records.”

Although a title insurance company will most likely be initially provided for you, you definitely do not have to go with this company.

You should shop around and see which title insurance will offer the services you need at the best cost. After all, you are already paying a lot of money just to buy a house, so it is helpful to save money whenever possible.

For greater information about refinance or more related subjects about home mortgage refinancing or about refinance loan please review these links.

Title Insurance Software

A comprehensive title insurance software package will help your company reduce costs, increase productivity and shorten title production time. It should enable a company to automate title production, escrow closing and settlement, recordation and policy issuance and allow for interactions with lenders, real estate agents, vendors, buyers and sellers more efficiently.

Insurance software is a widely varied and specialized industry. There are an numnber of types of insurance software available. One of those types is title insurance software.

An effective title insurance software package should allow for automated settlement processing of mortgages, generate estimated closing fee costs, print published documents, centralize closing documents, upload email and fax documents and keep a history of all interactions and transactions

The program should be easy to use, provide excellent customer service, connect stakeholders in title Issuance and settlement transactions with a user friendly interface and offer competitive pricing.

When looking for a reputable and viable title insurance software package, it is advisable to talk with a live representative or salesperson. Ask the salesperson as many questions as you desire. The questions should relate to all of the above recommended basic features of the services you are looking for. Before making a final purchase decision, make sure your checklist of requirements is complete. Once the price has been determined, make sure it is within your budget. If any of those requirements are not met, look to another provider. Once you have a list of two to five programs, choose the one that best fits your requirements.

Thorough research on your part will ensure you the best quality for your investment.

Insurance Software provides detailed information on Insurance Software, Insurance Billing Software, Health Insurance Software, Litigation Insurance Software and more. Insurance Software is affiliated

Enhanced Title Insurance - Who Needs It?

Why have title insurance in the first place? Because it protects one of the most important investments you will ever make...your home or investment in real estate! And because your lender will require it.

When preparing for your real estate closing, the closing agent will conduct a "title search", which means that they search the courthouse records for the chain of title on the property you are purchasing. Some of the things they look for include:

  • Any outstanding liens or judgments on the property
  • Any unpaid taxes, special assessments or homeowners association charges
  • Zoning violations
  • Fraud
  • Easements
  • Mistakes in any recorded documents
  • Forged or improper information on deeds, releases or wills
  • Any undisclosed heirs

Because your lender is providing the money for your purchase, they want to be sure that the property is free of encumbrances.

There are two main types of Title Insurance:

  • Lender's (or Loan) Policy - This policy is issued in the amount of the loan and protects the lender's interest in the property in case of any problem or defect with the title. This coverage is typically paid for by the seller of the property as part of giving the new buyer a clear title. One exception to this will be in the purchase of new construction. Most builders don't like to pay title insurance, so when you are considering the purchase of a brand new home, be prepared for this extra expense. This policy does not protect the buyer.
  • Owner's Policy - This policy provides protection for and is usually paid for by the homebuyer. I always ask for a "simultaneous issue" because the title company will provide this coverage for a very small one-time fee if it is purchased at the time of closing. The normal cost will be in the $35-$50 range. This policy will protect the buyer for as long as they (or their heirs) own the property...and will pay any legal fees involved in defending the claim.

What is an "Enhanced Policy"? And why do I ask for one in the purchase contract?

Because as your Exclusive Buyer's Agent, I want to provide all the protection I can to my homebuyer clients! Here are some of the additional benefits of having an enhanced policy:

  • Value added protection - The policy amount automatically increases (over 5 years) up to 150% of the original policy.
  • Post policy coverage - In the event of any liens being placed on the property after the policy is issued due to unpaid labor and materials not authorized by the homeowner, adverse possession or forgery.
  • Additional insured - Provides coverage for anyone who inherits title from the insured, including a spouse who might be awarded title in a divorce or the beneficiaries of the trust after death of the insured.
  • Zoning Law violations - Coverage in the event that the land was not properly zoned.
  • Encroachments - Coverage in case the homeowner is forced to remove existing structures which were located on the property at the time of policy issue...but encroach onto a neighbor's property. Also provides protection in the event a neighbor builds a structure (other than a fence) on the homeowner's property after the policy is issued.
  • Easements - Provides coverage if the homeowner is required to remove existing structures because they encroach into an easement or setback line. Also provides for any damage caused by use or maintenance of an easement.
  • Water and Mineral Rights damage - Coverage for damage to existing improvements and landscaping due to exercise of existing mineral rights.

There are more benefits (and also some restrictions) on the enhanced policies, but certainly worth the effort. The cost is minimal compared to the potential cost of any claims that could arise. Be sure to consider this type of coverage when you purchase your next home.

Pam Rumley is a veteran real estate broker in the Nashville, TN area. She is a true Exclusive Buyer's Agent, which means that her office never takes listings. This fact assures that there is never a conflict of interest regarding your real estate transaction. You can be assured of receiving 100% of her attention and loyalty - 100% of the time!

For more information, visit her comprehensive website http://www.NashvilleRealEstateAuthority.com Be sure to check out her "Real Estate University" section, where you will find more informative articles on a variety of topics concerning homebuying.