FAQ

Title insurance protects the homeowner from unforeseen claims against the property. The insurance will pay for legal defense, court costs and all related fees. It will also reimburse the homeowner for loss up to the face value of the policy.

Homeowners often ask the question, “Why do I need title insurance?” Your home is most likely the largest purchase you’ll ever make and title insurance plays a key role in protecting your investment.

A detailed title search is conducted after you sign the sales contract to purchase your home. The title search involves examining the land records pertaining to your property over the last 50 years. Though this is a detailed and thorough examination, there are many hidden issues that may not be uncovered by this process. For example, forgeries on original documents, missing heirs, improper deeds and ex-spouses are very difficult to detect in the title search. Title insurance protects you against these hidden risks.

One of the most common types of title issues is unreleased liens on the property. Even if the lien does not belong to you, since it is filed on the property, it becomes “attached” and must be cleared. Approximately one-third of all properties have some type of title issue or defect. An owner’s title insurance policy offers full protection against title defects as well as peace of mind to the homeowner.

It is important to understand the difference between the two types of title insurance policies, a lender’s policy and an owner’s policy. Your lender will require you to purchase a lender’s policy to protect their investment in your property. The lender’s policy is usually based on the amount of your loan, exists only over the life of the loan and protects the lender if a problem arises with the title.

Since the lender requires you to purchase a lender’s policy, you may be wondering why it’s strongly recommended to also purchase an owner’s policy. While the lender’s policy covers their interest in your property, it does not protect the homeowner at all. Consequently, if a title issue arises and you do not have an owner’s title insurance policy, you could be faced with large legal expenses to defend yourself against claims made on your property. With an owner’s policy, you can rest assured that the title company will pay valid claims and cover your legal expenses should a title issue arise against your property.

The owner’s policy is purchased for a one-time fee at closing and is based on the sales price. Unlike the lender’s policy which is effective only for the life of the loan, an owner’s policy covers the homeowner for as long as they or their heirs own the property.

If you refinance your home, the lender will require you to purchase a new lender’s policy since you are obtaining a new loan. The lender wants to be protected in case any claims have arisen since you originally purchased the property. You do not have to purchase a new owner’s policy since the original policy is in effect as long as you still own the property. You also may be entitled to a reissue rate, or discount, on the new lender’s policy if you have an owner’s policy that is less than ten years old.

It is our job to coordinate the interests of all parties to a real estate transaction, including the buyers, sellers, mortgage lender and real estate agents. We make sure that all requirements for settlement are fully satisfied. After the Sales Contract is ratified, it is sent to us to review for accuracy and completeness and to begin the title process, which involves the following steps:

1) Title abstract: We research the title to the property through a title abstract, which provides a history of the property and its ownership. It is our job to examine the title and clear any liens or claims on the property so that the new buyer receives clear and marketable title to their new property.

2) Property taxes: We verify with the local or state taxing authority that the property taxes have been paid. Similarly, we check with the water company and Homeowners Association to confirm that all payments are current. On the HUD-1 Settlement statement, we will prorate the amounts based on the billing period and the settlement date.

3) Title insurance policy: We prepare the insurance commitment for the lender’s title insurance policy and issue both owner’s and lender’s coverage. There are two types of Title Insurance: Lender’s, which is required by the mortgage company, and protects the lender’s investment in the property; and Owner’s, which may be purchased at settlement for the benefit of the new owner. It is strongly recommended that all buyers receive an owner’s title insurance policy which protects them against any unforeseen claims, hidden risks, or fraud against the property. The insurance policy provides protection from financial loss as well as payment of legal costs necessary to clear such claims.

4) Loan documents for closing: We also coordinate with the mortgage lender to receive the loan documents for closing. Once received in our office, we review all forms and comply with the lender requirements for closing. With these documents, we are then able to complete the
Closing Disclosure or assist a lender in preparing it. This disclosure is one of the most important documents to sign because it details all of the costs associated with the purchase and sale of the property. We also prepare the deed and other documents necessary to comply with state and federal laws.

5) Closing: At closing, all documents are explained to all parties prior to signing. Settlement lasts approximately one hour. After closing, we disburse all the monies collected at settlement and pay vendors such as the termite company and surveyor. We also pay off and release the existing mortgages on the property and prepare the loan documents to be returned to the lender.

6) Documents recorded in courthouse: It is our responsibility to make sure all documents are properly recorded in the courthouse, such as the new deed and Security Instrument. We also ascertain the release of any existing liens on the property.

A title search is a detailed search and abstract of the land records concerning a property. A typical search for a purchase transaction goes back 50 years. The types of documents contained in a search include deeds, mortgages, court records, property and name indexes and taxes, as well as many other documents. An experienced attorney or title officer will examine these records to determine if the title to the property is insurable for the new owner. We look to determine the owner’s right to transfer and ascertain any liens or defects on title.

A title search can reveal problems such as defects and liens, as well as unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land. Approximately one third of all title searches reveal some title defect that must be cleared. The most common type is an unreleased lien. The most problematic title issues are outstanding interests of a person on title or forgery.

There are some hidden hazards such as fraud, forgery, missing heirs, defective deeds, confusion due to similar or identical names and clerical errors in records that cannot be detected in a title search.

All money needed for a real estate transaction must be brought either to settlement or sent to the title company before closing. The money must be “good funds” which means it has to be in the form of a wire transfer.

No, it is not duplicate coverage. Your lender will require you to purchase a lender’s policy to protect their investment in your property. The lender’s policy is usually based on the amount of your loan, exists only over the life of the loan and protects only the lender if a problem arises with the title. A lender’s policy does not protect the owner, which is why the owner should purchase an owner’s policy.

Generally, buyers must sign for themselves. In financed transactions, power of attorney may be granted only upon approval of the buyer/borrower’s lender of a specific power of attorney.

Generally, sellers must sign for themselves. Sellers, in many circumstances, may give power of attorney for someone to act on their behalf in a form provided by the firm.

Military Powers of Attorney get special treatment and are presumed valid on their terms irrespective of State Law requirements.

Up until the recent adoption of the Uniform Power of Attorney Act, Fiduciaries, like Executors, Administrators and Trustees, could not give power of attorney to anyone to carry out their duties. Old English common law settled this principle long ago. It was said delegatus non protest delegare. Which literally means the Delegate may not delegate.

This Act changed all of that, and now, if empowered to delegate, an Agent under a POA may give authority to act to another.

All parties to a transaction will be presented with a Settlement Statement to review and sign. The statement outlines and details the costs and credits for each party to the transaction. In residential transactions you may also see a Closing Disclosure which presents the same information and additional info required by Federal law.

If you are financing the purchase, you will see documents from your lender including a Promissory Note and Deed to Secure Debt.

If it is residential loan, most of these forms can be found at https://www.fanniemae.com/singlefamily/legal-documents

Georgia is an “Attorney” state which means that an closing of a sale transaction is the practice of law. The attorney with generally represents the lender in the transaction but is otherwise considered a neutral third party and does not represent either side of the transaction but is there solely to make sure the settlement is completed pursuant to the contract as written. That is why all agreements among the parties must be in writing in order to be valid.

All parties to a transaction will be presented with a Settlement Statement to review and sign. The statement outlines and details the costs and credits for each party to the transaction. In residential transactions you may also see a Closing Disclosure which presents the same information and additional info required by Federal law.

Sellers will also be asked to sign:

1. A Deed (Warranty Deed, Limited Warranty Deed, Quit-C laim Deed or an Estate Deed)
2. An affidavit to give assurances as to matters affecting title
3. Tax related paperwork for federal and state requirements; and,
4. Various additional documents

MAYBE: It is important to note that transfer to a fiancé, boyfriend, girlfriend or any person other than a spouse IS NOT PROTECTED.

You CAN seek written permission from your lender.

Why, you ask: In a Georgia real estate closing involving financing, among the various documents being signed, the purchaser signs two important loan documents, namely, the Security Deed and a promissory note.

The Security Deed is a document that grants the bank a security interest in your home.

The promissory note is your legal obligation to pay the bank the principal, interest, escrow, etc.

To answer the question above, it is important to understand the contents of the promissory note that dictates the obligations between you and your lender.

Most loans originated today contain a “due on sale clause.”

The “due on sale” clause (also known as the “acceleration clause”) is a term in a promissory note document that grants the lender the right to demand payment of the remaining balance of the loan when the property is sold or transferred.
So, any transfer (unless a permitted exception) can trigger this right.

Legally, while the bank has the authority to call the balance immediately due or initiate foreclosure proceedings, they seldom do, so long as monthly payments are received.

The Garn St. Germain Act provides several exceptions in which the lender can’t enforce the “due on sale” clause.
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, a lender may not exercise its option pursuant to a “due on sale” clause upon:
The creation of a lien or other encumbrance subordinate to the lender’s security instrument which does not relate to a transfer of rights of occupancy in the property;

The creation of a purchase money security interest for household appliances;
A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
The granting of a leasehold interest of three years or less not containing an option to purchase;
A transfer to a relative resulting from the death of a borrower;
A transfer where the spouse or children of the borrower become an owner of the property;
A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;
A transfer into an inter-vivos trust in which the borrower is and remains a beneficiary and that does not relate to a transfer of rights of occupancy in the property; or
Any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.