Presentation Transcript

1. Title and Insurance Between the contract and the closing, three important activities usually take place: The seller must prove that she has title to the real estate under the contractually established standard. The buyer makes arrangements for property and liability insurance. The buyer borrows money to finance the purchase. 1
2. Title Title: The right to possess real estate as evidenced by a historical record. A buyer can acquire such rights to real estate only as the seller has the power to convey. 2
3. Title Recording: The act of placing in the public record documents that give the world notice of the information therein. When determining priorities among competing interests, it is often important to know whether the parties had knowledge or notice of the other claim. 3
4. Title Actual Notice: KNOWLEDGE Constructive Notice: imputed to a person public records Inquiry Notice: Notice of facts that create a duty to inquire further whether unrecorded interests exist. 4
5. Title The Common Law Approach: Before recording statutes were enacted, the common law rule was simple and easy to apply: the first deed prevails over later deeds. First in time is first in right. 5
6. Title 3 Types of Recording Statutes: Race Notice Race/Notice 6
7. Title The Race Statute: Under a pure race statute, the first to record wins. The purchaser need not be bona fide or without notice.
8. Title Bona Fide Purchaser: Relevant to determining claims in both notice and race/notice states. A good faith purchaser who pays value and is without notice, either actual or constructive, of a prior adverse claim. Value No Notice No Actual Knowledge
9. Title Recording Statutes: The Notice Statute: Under a “notice” recording statute, an unrecorded conveyance is not valid against later bona fide purchasers. The last bona fide purchaser takes priority The Race-Notice Statute: Under a race-notice statute, a later purchaser not only must be bona fide but also must record the deed before other purchasers. The first bona fide purchaser to record takes priority 9
10. Title Recording Statutes: Chain of Title: A record of successive conveyances (or other forms of alienation) affecting a particular parcel of land that are arranged consecutively from the government or original source of title down to the present holder. 10
11. Title Recording Statutes: Chain of Title: Tract Index: A land records system in which conveyances of interests in real property are indexed geographically by tracts. 11
12. Title Chain of Title: Grantor-Grantee Index: A land records system in which conveyances of interests in real property are indexed in two separate indices, first alphabetically according to the grantor’s surname and then alphabetically according to the grantee’s surname. Each Deed includes a Derivation Clause, identifying the preceding conveyance. 12
13. Title After a search of the records has created a chain of title, the instruments are examined to determine whether they were properly executed, what interest they conveyed, and whether there are any encumbrances on the property. Also, the property tax records have to be examined to make sure there are no delinquent taxes.
14. Title After all of the documents have been examined, and all of the interests have been identified, an attorney may render a title opinion, or title certificate, in which they state whether the seller has marketable title and identify any encumbrances on the title. This may be issued to a title insurance company, which uses it as the basis for issuing a title insurance policy.
15. Title Insurance One premium, paid at closing Looks backward, not forward like most insurance policies. Insures against defects in the chain of title. Lender’s generally require title insurance to protect their lien in the property. Owners can get a separate policy. Commitment issued before closing – will specify certain requirements as a condition of getting the final policy. Release of existing mortgage, tax liens Warranty deed from seller
16. Homeowners Insurance Losses resulting from damage to the property Fire Tornado Losses arising when a person is injured on the property. Does not cover intentional acts by homeowner Lenders require It has an insurable interest up to the amount of the debt. May require homeowner to pay premiums with mortgage payments.