Many people believe that if they choose to use a title company for their closing, they will save money by avoiding large attorney fees. This could not be further from the truth, especially at Ackerman Law. Title insurance rates are promulgated by the Department of Insurance so title insurance obtained through an attorney is priced the same as from a title company. When it comes to closing fees, we charge less than most title companies. We are not driven by money. Our main goal is to help people purchase, sell or refinance their home, from contract to closing, in a smooth and thorough manner. We deal with the stress, so you don’t have to.
Title companies are corporations that are staffed simply by processors and closers, who may have very limited training and experience in real estate transactions. In most cases, there is not an attorney involved in the transaction to handle any legal issues which come into play throughout the closing process. The processors at a title company cannot offer you legal advice or guidance about contracts or means of taking title. A title company’s role is limited to preparing basic form documents necessary to issue a title insurance policy in connection with the closing, and cannot prepare many pertinent legal documents for closing. A title company cannot provide legal advice, input or guidance when a title issue arises. In fact, when a title company is the closing agent and a legal matter comes about, the parties often find themselves rushing to retain an attorney (now at a major additional expense) to help navigate through and resolve the new issues.
When you use a law firm to handle your closing, your title is examined and reviewed by a trained professional who has extensive knowledge of real estate law. A real estate attorney is trained in the vast complexities of real estate law. Attorneys can negotiate issues on your behalf, offer legal advice, resolve title and other legal issues, explain the meaning of closing documents and draft additional legal documents needed for closing, such as power of attorneys. When using a law firm as the closing agent, the client has legal representation throughout the transaction, from contract negotiations through closing. In preparing for closing, if the title search or survey reveals a potential issue, the attorney can provide legal advice as to the best and fastest way to cure the issue and prepare the necessary corrective documents so the parties can close quickly (generally at no additional charge).
When you make the biggest purchase of your life, you need to feel safe and secure that you are getting a property completely free of title issues.
In real estate law, title is the total of legally recognized rights to the possession and ownership of property. It includes all elements such as ownership, possession and custody in regards to the legal right to control and dispose of property. In simple terms, it is the legal link between a person who owns property and the property itself.
A title search is the search of records performed in connection with real property to uncover information such as who the current owner of a property is, what the purchase price and date were, whether there are any mortgages on the property and whether there are any liens, judgments or law suits affiliated with the property. The title search will always be conducted prior to the closing and issuance of title insurance.
A title search can reveal many different types of defects in title, as well as existing or unresolved liens, encumbrances and restrictions. These include unpaid property taxes, easements, unsatisfied mortgages, judgments against the property owner and restrictions of use or transfer.
Title insurance is an insurance policy that guarantees that the title to a particular property is clear of any claims or liens and the owner has the right to sell or otherwise transfer the property. It protects both the buyer and mortgage lender (if applicable) against errors and omissions during the title search. The insurance company will pay the damages to the new owner or secured lender or take action to fix the issues if a problem is later discovered, such as an incorrect boundary description. The insurance company will also cover any legal fees, if necessary.
Title insurance covers issues that were not discovered during the title search or were missed by the title examiner, as well as any errors in public records. Title insurance does not cover defects that occur after you purchase the property. Title insurance policies are paid in-full with a one-time fee which is a part of closing costs. The party that pays the premium depends on the local custom, contract and who selected the title agent.
There are two types of title insurance policies, an owner’s policy and a lender’s policy.
The owner’s policy is almost always issued for the amount of the real estate purchase. It is a one-time fee, paid at closing and the owner’s coverage will continue for as long as the owner owns the property. It differs from other types of insurances in that the coverage is based on the price of the home and the cost is the same no matter who issues the title policy (there is no need to shop around for the best insurance rate).
The owner’s policy protects the buyer’s investment in case a title issue should arise. Some examples of title issues include defective deeds, errors during the title examination, potential fraud or forgery and undisclosed heirs. If any of these issues do come to fruition, the owner’s policy is a guarantee to buyers that their title insurance company will assist buyers, both financially and with legal defense, if necessary.
The lender’s policy protects the lender’s interest in the property as security for the outstanding balance under the buyer’s mortgage. This is supplied to the lender, with the original recorded mortgage.
A warranty deed is the document signed by the seller and recorded in the public records of the county where a property is located, transferring title of the property from the seller to the buyer.
A warranty deed must contain all six standard covenants of title, which are lawful promises made by the seller, regarding the property and meant to protect the purchaser. The standard covenants are classified as either present or future covenants. Present covenants are concerned with status of the title at the time of conveyance (time of closing). They include the right to convey the property, that seller has legal possession of the property (seisin), and that there are no encumbrances, which means that there is no third party which has an outstanding interest in the property that could decrease the value of the property being conveyed.
Future covenants bind the grantor even after the conveyance. These include seller’s assurance that the property is as promised (warranty), seller’s assurance that purchaser and purchaser’s heirs, successors and assigns will have peaceful and quiet possession of the property (quiet enjoyment) and seller’s obligation to provide further conveyances or releases necessary to secure the purchaser’s title (further assurance).
A quitclaim deed does not contain any of the covenants listed above. Quitclaim deeds are often used to clear clouds on title, to convey title between divorcing spouses, to add a spouse or other party to title or to transfer title from individuals to a trust.
A joint tenancy with right of survivorship is a form of ownership where there are two or more individual owners of the property. Upon the death of one joint tenant, the deceased tenant’s portion of the property automatically transfers to the surviving tenant(s). The surviving tenant(s) becomes the owner of the fee simple title, free from any claims of the heirs and creditors of the deceased.
A tenancy in common is a form of co-ownership with no right of survivorship. Upon the death of one owner, his or her interest passes to the tenant’s heirs/devisees upon death, not to the other owner.
This document, usually reviewed first at the closing, is a breakdown of the financial portion of the real estate closing. Known interchangeably as the “HUD”, “HUD-1”, “Settlement Statement” or “Closing Statement”, this document will state the contract purchase price, deposit, loan amount, sellers mortgage payoff, broker fees, tax prorations, HOA prorations (if applicable), all closing costs to the buyer and seller, total amounts due and sums to be disbursed by the title company at closing. Additionally, if the buyer is financing the property and it is a residential, primary residence, the HUD will compare the lenders GFE to the actual closing costs, as well as re-disclose the terms of the loan.
Homestead exemptions are exemptions from real estate property taxes that homeowners can claim. According to the Florida Department of Revenue, every person who owns and resides on real property in Florida on January 1st of each calendar year and makes the property his or her permanent residence is eligible to receive a homestead exemption up to $50,000. The first $25,000 applies to all property taxes, including school district taxes. The additional exemption up to $25,000, applies to the assessed value between $50,000 and $75,000 and only to non-school taxes.
When the transaction involves the financing of a residential purchase, the lender will collect the interest due from the date of the closing to the first day of the following month. Most residential loans require payments to be due on the first day of the month. Each monthly payment will include the principal and interest due on the loan for the previous month (payments are in arrears). For example, if a closing occurred on the 15th day of the January, the lender will collect pre-paid interest through January 31st. The buyer’s first payment will be March 1st, and this payment will cover the month of February.
A short sale is a situation where the value of a property is less than what the property owner currently owes on the property, so the proceeds will fall short of the balance of debts secured by any mortgage or other lien against the property. In many circumstances, the property owner cannot afford to repay these liens in their full amounts, so the property owner (or its agent) negotiates with any lien holders to agree to accept a lesser amount than the unpaid debt and release their lien on the property. Any remaining balance owed to the creditors is known as a deficiency.
In many cases, but not in all, the short sale agreement will release the borrowers from their obligations to repay any shortfalls on the loans and the lender will agree not to go after the borrower for a deficiency judgment. However, sellers should always talk to their accountant or a tax attorney before trying to short sale their home, to explore what their tax implications might be if they are involved in a short sale
There are many benefits for someone who needs to sell their home as a short sale. First, the seller can avoid a foreclosure. Although the sellers credit will suffer some damage, it is significantly less than the results of a foreclosure. Additionally, a seller will be able to qualify to purchase a new home much sooner than if the seller had a foreclosure on their records. Short sales help adjust the real estate market to have a more realistic value of what a property is really worth. Also, today, many lenders offer cash incentives to sellers who are selling their primary residence (versus an investment property).
According to the website of the Internal Revenue Service, FIRPTA involves the sale or transfer of a U.S. real property interest by a foreign person, who is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on the sale or transfer of U.S. real property interests. This includes, but is not limited to, a sale or exchange, liquidation, redemption, gift, transfers, etc. When buyers purchase U.S. real property from a foreign seller, the attorney handling the closing is required to withhold 10 percent of the sale price and file certain paperwork with the Internal Revenue Service, drafted by an accountant, to determine what amount, if anything, is owed to the IRS.
A transaction can avoid being subject to FIRPTA, even if the seller is a foreigner, if the buyer is acquiring the property for use as a primary residence (not investment) and the sale price is not more than $300,000. The buyer or a member of the buyer’s family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant.
Typically on the day before closing, the buyer will be provided with a final amount as “cash to close”. We will also provide the buyer with wiring instructions, as all “cash to close” must be in the form of a wire. All closings are conducted either in one of our many offices throughout the area or at any location which is most convenient to the clients. At closing, we will review the settlement statement and closing documents as thoroughly as the client requests. Every closing and client is different and we will take the time to explain and answer each and every question the client has. After signing, the closing will be complete. There will be documents you receive both right after closing and some which will be sent several weeks after closing.