Why Do I Need Title Insurance? The Tale of the Lingering Line of Credit…

Why do I need Title Insurance? Good question.  And there are many good answers.   Title insurance is one of those things that property owners may not appreciate until it comes time to make a claim.  And when a claim is covered, that property owner thanks their lucky stars (and their Title insurer) because claims can be very costly.

Here is one scenario that illustrates why having title insurance with a company that has a large claims reserve is a good thing:

Johnny Home Owner took out a line of credit loan which was secured by his property in the form of a Deed of Trust.  Some time later, Johnny Home Owner sold the property to Sally Home Buyer.  The sale closed in a seemingly normal fashion and Sally Moved in and proceeded to make her house payments on time.

The Hitch:
A step in the closing process was inadvertently missed, allowing Johnny to continue to draw thousands of dollars of funds from the Line of Credit which was still secured by the property that is now owned by Sally.  “What?,” you ask.  How is this possible?

The step that was overlooked:
Specifically with a Line of Credit, the borrower (Johnny) needed to send a written statement to the lender in order to close the line of credit.  Unlike a regular loan attached to a deed of trust, a Line of Credit cannot be closed without a written statement from the borrower (Johnny).  The lender will not release the property now owned by the buyer, without that written notification.

Sally Home Buyer went into foreclosure:
Months after moving into her new home, Sally received a foreclosure notice against her new property from a lender that she didn’t recognize.  Alarmed, she investigated and discovered that  Johnny’s Line of Credit is attached to the property and in default.

Never fear, Sally Home Buyer has Ticor Title Insurance…
Sally, alerted Ticor Title of the foreclosure against her property due to the previous owner’s outstanding Line of Credit.  Ticor evaluated the situation and in this case took steps to stop the foreclosure, eliminate the Line of Credit, and remove the cloud on title.

The moral of the story:
Choosing a title company with a hefty claims reserve will make all the difference in the world when it comes time to cover a claim.  Ticor Title as a member of the FNF family of companies, has the nations deepest claims reserves at $2.6 Billion dollars.  The choice is yours!

If you have questions about title insurance, you can call or text us at 253-318-1909.

This story was provided by Gregg Colbo, Senior Underwriter, Ticor Title.  This story is based on real life circumstances.  However, the names of the people in this story are ficticious and were chosen randomly.  The intent of this article is to illustrate the value of title insurance.

What are the typical closing costs? And who traditionally pays them?

Click the image to download a guide to customary closing costs.

Purchasing a home generally revolves around two things: emotion and money. In this post we’d like to address the money portion, in particular we’ll touch on closing costs. Customary closing costs are a huge part of buying a home and during the purchase of a home you’ll find escrow plays a huge part in calculating these closing costs.

Definition of Closing Costs: Fees and expenses, over and above the price of the property, incurred by the buyer and/or the seller in the property ownership transfer. Examples are title searches, closing services, loan fees and deed filing fees. Also called settlement costs.

Per the definition you can see there are two sides (buyer and seller) to the equation when determining closing costs. Below is a simple customary closing cost list. Keep in mind these are typical, but should not be considered hard fast rules, feel free to consult your real estate agent for more detail.

Typical Closing Costs for a BUYER:

  • One-half of the escrow fee (according to contract)
  • Lender’s title policy premiums
  • Document preparation (if applicable)
  • Tax pro-ration (from date of acquisition)
  • Recording charges for all documents in buyer’s names
  • Home Owner’s insurance premium for first year
  • Home Warranty (according to contract)Preview
  • Inspection fees (according to contract): roofing, property, geological, pest, etc.
  • All new loan charges (except those required by lender for seller to pay)
  • Interim interest on new loan from date of funding to first payment date

Typical Closing Costs for a SELLER:

  • One-half of the escrow fee (according to contract)
  • Work orders (according to contract)
  • Owner’s title insurance premiums
  • Real estate commission
  • Any judgments, tax liens, etc. against the seller
  • Any unpaid Homeowner Association dues
  • Home Warranty (according to contract)
  • Any bonds or assessments (according to contract)
  • Any loan fees required by buyer’s lender (according to contract)
  • Recording charges to clear all documents of record against seller
  • Payoff of all loans in seller’s name (or existing loan balance being assumed by buyer)
  • Interest accrued to lender being paid off, reconveyance fees and any prepayment penalties
  • Excise Tax (% based on county and sale price)

Buying or selling your home can be one of the biggest financial decisions of your life.  But knowing what to expect by being informed can make the process easier for you!

To download a single page guide to customary closing costs, click here!