The Property Tax Annual Cycle

There are few things in life that are as certain as taxes, especially when it comes to buying, selling, and owning real estate.  In this article, we’re going to take a look at property taxes, including when they are due, when they may be paid, how they’re calculated, and what tax relief programs are available.

The Property Tax Timeline

Property taxes have a timeline that is different than most other taxes or bills that we pay. Let’s take a look at the facts:

  • Taxes are due twice a year, but towards the middle each cycle
  • First half taxes are due at the end of April and cover January through June
  • Second half taxes are due at the end of October, and cover July through December
Click  the following link to download a printable version of the Property Tax Annual Cycle Infographic.

Property tax proration

Because taxes are due toward the middle of the period they cover, a real estate seller may receive a refund or pay prorated taxes depending on the closing date.  For example, a sale that closes in March will have both parties paying prorated taxes: the seller pays for January 1st to date of closing, and the buyer pays from the closing date to June 30th. A closing that happens in May, would give the seller a refund for prorated taxes from the closing date to the end of June, since the seller would have paid in April for the entire first half of the year.

Can property taxes be paid in advance?

When are taxes due?

1st half are due the last day of April, 2nd half are due the last day of October. King County mails out a statement in the middle of February (February 14th for this year – Happy Valentine’s Day!)

Taxes for the second half of the year can be paid in advance, but the first half can’t. Washington State law (RCW 84.56.010) doesn’t allow county treasurers to collect property taxes until February 15 of the year that they are due. So the first half is typically payable any time between Feb 15th and April 30th; and the second half is typically payable any time between Feb 15th and October 31st. It is not necessary to have a tax statement to mail in with your payment. If you decide to mail in your payment without a tax statement, you must write your tax account number on the check. Mailed payments must be postmarked on or before the due date otherwise they will be considered late.

How are property taxes calculated?

How taxes are calculated

The two factors used in the calculation of taxes are the assessed value of the property and the levy rate for that area. Levy rates are represented in dollars per thousand, so to calculate the tax amount multiply the assessed value by the levy rate and divide by 1,000.

The property tax for a given parcel are based on a fairly simple calculation: multiply the total assessed or taxable value of the parcel by the levy rate for that parcel’s neighborhood. In addition there can be fees added by the county to cover specific services like noxious weed control.

Last Year’s Assessed Value x This Year’s Levy Rate = Tax Amount Due

What determines the levy rate?

The levy rates are determined by a number of factors, including the results of voter-approved levies. Property taxes usually aren’t certified until the middle of February, even though the assessments were mailed out the previous year (which often causes confusion). In other words, the assessed valuation statement you get in the 2ndhalf of this year has no effect on the taxes you are paying this year. The valuation will be used in the calculation for next year’s taxes. You won’t know the actual tax you will need to pay for 2012 until the county certifies 2012 taxes in the middle of February, even though 2012 assessed values have been available for months.

Assessed value vs. taxable value

The assessed value is typically the same as the taxable value except in cases where the taxpayer has applied for and received an exemption. For example, senior and disabled property owners may qualify for tax reductions. In some cases home improvements may qualify for a 3-year exemption for taxes on the value of the improvement. For more information on possible exemptions or tax defererals, contact the Assessor-Treasurer for the county in which the property is located.

What tax relief programs are available?

Here are some examples of programs and special classifications available that provide tax relief:

  • Open Space Classification for Agricultural land, Timberland, and Natural preserves.
  • Designated Forest Land Classification for timberland parcels 20 acres or more.
  • Historical Restoration Exemption for historical significant property undergoing restoration.
  • Improvement Exemption – Single Family Dwellings a temporary exemption of valuation of additions to single-family dwellings.
  • Destroyed Property Claim adjustment to the valuation of destroyed property. (please note this program is handled by the Admin department, for further information please contact them at 425 388-3038).
  • Property tax exemptions for senior citizens and disabled persons
  • Full tax deferrals for senior citizens and disabled persons.
  • Exemptions for qualifying property owned by non-profit organizations.
  • Property tax deferral for those with limited income.

Property tax resources:

King County property tax resources

King County Assessor-Treasurer hotline: (206) 296-3850
Find your tax parcel account number: King County tax parcel search
See or print a tax statement: View or print King County tax statements here.
Make online payment: Pay King County Property Taxes Online
Make checks payable to: King County Treasurer
Mailing addresses for property taxes: King County Treasury 500 Fourth Avenue, Room 600 Seattle, WA 98104

Pierce County property tax resources:

Pierce County Assessor-Treasurer hotline: (253) 798-6111
Find your tax parcel account number: Pierce County tax parcel search
See or print a tax statement: View or print Pierce County tax statements online here.
Make online payment: Pay Pierce County Property Taxes Online
Make checks payable to: Pierce County
Mailing addresses for property taxes: Pierce County Budget & Finance P.O. Box 11621 Tacoma, WA 98411-6621

Snohomish County property tax resources:

Snohomish County Assessor-Treasurer hotline: (425) 388-3433
Find your tax parcel account number: Snohomish County Tax tax parcel search
See or print a tax statement: View or Print Snohomish County tax statements online here.
Make online payment: Pay Snohomish County Property Taxes Online.
Make checks payable to: Snohomish County Treasurer
Mailing addresses for property taxes: Snohomish County Treasurer 3000 Rockefeller Ave, M/S 501 Everett, WA 98201

The Life Cycle of Bankruptcy – Chapters 7, 11, and 13

Even though bankruptcy filings are becoming more and more commonplace, the process itself is still not easily understood by most people. In general, the bankruptcy process is intended to ultimately give debtors a fresh start. But the path to that fresh start depends on many factors. In the lifecycle of bankruptcy flow chart below, you’ll see the most common paths taken for the 3 most common types of bankruptcy : chapters 7, 11, and 13.

Download a printable version of this chart.

Click the image below for a printable version of this chart.
Download Life Cycle of Bankruptcy Chart here.
Click here to view a printable version of the lifecycle of bankruptcy infographic

General Notes:

  1. Creditors or Partners can file an involuntary petition asking the court to place the Debtor in bankruptcy against his/her/its will.
  2. Any sale or financing of real property is subject to the approval of the Bankruptcy Court.
  3. Judgements and Liens remain attached to the property until specifically released by an order to sell the property free and clear of specific liens and judgements; or an order avoiding the specific lien or judgement, which could be limited to the amount of the homestead exemption and therefore still attach to the property for the amount, if any, in excess of the homestead exemption.
  4. Warning! This chart is intended as a general overview of the process.

Life Cycle of Bankruptcy infographic- Chapters 7, 11, and 13

Please share your questions or comments below!

A Case of Brotherly Identity Theft…

The case…

This is a real estate fraud/identity theft case brought by plaintiffs Darryl Dumas (“Darryl”) and Darryl Dumas as Trustee of the Dumas Revocable Living Trust Agreement Dated February 7, 2001 against Darryl’s brother Derrick Dumas (“Derrick”), among others, concerning real property located at 1875 Paradise Drive, Los Angeles, Calif. 90025 (“Subject Property”). On January 12, 1994, Darryl purchased the property by Grant Deed. In 1998, Darryl moved out and began renting out the subject property. In April of 2001, Darryl transferred title to the property to his trust.

Identity Theft
In 1999, Derrick started a mortgage brokerage company known as Countywide Loans. In February 2008, Derrick indicated he could arrange for Darryl to obtain a line of credit with Chase, secured by the subject property for up to $500,000 on favorable terms. Darryl was interested in an increased line of credit to have the flexibility to make investments when the opportunities arose. Darryl agreed to apply for the Chase secured equity credit line and allegedly provided his brother, Derrick, with his personal financial information in order to facilitate the application.

ID Theft & Real Estate Fraud

Derrick was out of the country from June through November of 2008. In early November 2008, Darryl’s other brother, David, informed him that Derrick had obtained a loan against his home under his name without his knowledge or consent. Darryl then asked David to check the records for the subject property to see if Derrick might have done something similar to him. A few days later, David advised Darryl there was a $350,000 loan against the subject property in favor of a lender named Overland Direct. Derrick’s company, Countywide, had originated the loan and sold it to Overland Direct. Our Company insured this transaction and issued a $350,000 lender’s policy to Overland Direct.

“Derrick confessed that he had stolen Darryl’s identity, forged his signatures on the loan documents to take out a loan…”

Derrick returned to the United States in the middle of November 2008. On November 16, 2008, Darryl confronted him at their parents’ home. Derrick confessed that he had stolen Darryl’s identity, forged his signatures on the loan documents to take out a loan from Overland Direct against the subject property and kept the loan proceeds.

Forgery Claim Covered

The Notaries…

The notaries of the various documents involved in this fraud were Dante C. Gumiran (Commission No. 1638844, CA) and Caroline P. Diaz (Commission No. 1522651, CA). Both Gumiran and Diaz were employed by Derrick at Countywide Loans. Gumiran signed a declaration that his boss, Derrick, instructed him to notarize the relevant documents outside the presence of the purported signer, Darryl. Diaz alleges in her declaration that she did not notarize the documents at all and that her signature is a forgery. She insinuates that someone used her notary stamp, which she left at her desk at Countywide Loans.

In February 2009, Overland Direct’s $350,000 note went into default and the loan went into foreclosure. Overland Direct received notification from Darryl, however, that his signature was forged and that he never applied for the loan in question. Based on this information, Overland Direct submitted a claim to Our Company.

Our Company ended up defending our insured lender in a suit filed by Darryl as well as ultimately incurring a policy limits loss ($350,000) plus expenses on this claim.

Recouping our Losses

This matter has been reported to law enforcement and we are following up to ensure the notaries have been reported to the notary board in California for further investigation. In addition, we are pursuing Derrick in a civil action to recoup our losses.

By The Way
We have two other claims involving Derrick forging borrower’s names, which are still in the midst of investigation and will result in further litigation. As a result, the names of the parties (with the exception of the notaries) have been changed.

Questions or comments? Please share below!

The Probate Path – Married Community Property

probate path for married or domestic partnership community property

Our previous probate path blog post discussed the sad tale of Sam Smith, who died with no kids, and the happy tale of Rolf, his nephew and sole heir who discovered that he had the proverbial “rich uncle.”

Three Basic Probate Situations

As noted in the December 6th blog, there are three basic probate situations:

  • The owner was single – not married or a domestic partner
  • The owner was married or a domestic partner and it was community property
  • The owner was married or a domestic partner, but it was separate property (not community property)

There are variations: did the deceased have a will? Is the estate being probated (with or without a will)?

Today we talk about another probate situation, this time involving community property.

A sudden passing with no will

Shelley and Norma are domestic partners, and live in a home that they bought together in 2009 (see the August 2011 blog post, “Domestic Partnership Law in Washington State” where community property laws apply to both a married couple and domestic partners). Shelley has two children, Albemarle and Adelaide, from a previous marriage. They also adopted a child together, Angelina.

Sadly, Shelley passed away from a sudden illness. She did not have a will. The question arises – who gets the house? Is it just Norma, or can Albemarle and Adelaide claim an interest, perhaps forcing a sale of the home in order to get their share? What about little Angelina?

This is a basic community property situation, and Norma inherits the house, free of any claims by Albemarle or Adelaide, and it becomes her separate property. When her time comes (assuming she doesn’t sell the house, get married or enter into a new domestic partnership before then), only Angelina would inherit from her.

“…the children don’t come into play when either parent dies – only when the surviving parent later dies.”

Now, if Norma had died first, the same rule would apply – that is, Shelley would get the house as her separate property. However, when she passes away, Albemarle, Adelaide and Angelina would all inherit the house. In any case, the children don’t come into play when either parent dies – only when the surviving parent later dies.

Determining who is in title

Probate path for married or domestic partner at death & community property

Click the image above to download a printable version of this chart

But we are getting ahead of ourselves. Right now, a Realtor® is listing the house for Norma, and the title company has to decide who is in title and who would need to sign a deed. If there isn’t a lot of money at stake a probate probably wouldn’t be necessary, so a “lack of probate” affidavit is the starting point.

Most community property situations are pretty straightforward, because when two parents own the home as community property it passes directly to the surviving spouse when one passes away, and their kids will end up with it eventually anyway. The chart to the right shows how the title company would proceed to identify who must sign the deed. As in Shelley’s case, with no probate for what is clearly community property, the Probate Path No. 1 is followed.

To view the probate path chart click here. (a PDF will open in a new window)

Complications may arise

However, complications can arise when there are children from a previous marriage, and it may not be so simple for the title company. For example, Albemarle and Adelaide could raise a fuss, and even though it is apparent that Norma inherits the house, the title company may want to get a deed from them. Why might they want to make a claim? Well, Shelley could have inherited the house, in which case, even though that happened in 2009, it would be her separate property, and Norma could be out of luck. Or, maybe Shelley paid the entire purchase price with inherited money, in which case her heirs could argue it was her separate property because separate funds were used to buy it. But let’s add another wrinkle – maybe Shelley contributed the down payment from separate funds, but Norma made the mortgage payments. She might claim an interest – perhaps a “marital” lien, saying that some of the equity value was acquired by her for the value of what she paid. Albemarle and Adelaide could be anything from the sole owners to part owners to having no interest at all.

Lack of probate affidavit

Hopefully, all the complications would be identifiable in the “lack of probate” affidavit. Of course, Norma could open a probate for Shelley (especially if there was a will), and no matter what Albemarle and Adelaide would claim, the probate court would deal with it. The title company would follow either Probate Path No. 3 or 4, and a deed from the personal representative in the probate would be sufficient.

To download a printable version of the probate path chart, click this link: probate path infographic

Questions or comments? Please share below!

5 Title Insurance Questions to Consider when Purchasing a Home

5 Title Insurance questions to ask when buying a home

For most people, purchasing or refinancing a home happens only a few times in a lifetime.  And thus the topic of title insurance is only top of mind for a fleeting moment once every few years.  So if you’re in the process of selling or buying real estate, here are a few refresher questions you may want to consider with regards to the topic of Title Insurance.

1. Are title insurance rates regulated in Washington state?

Yes.  All title insurance rates and policy forms are filed with the Office of the Insurance Commissioner.  If the Commissioner finds that a title insurance rate is excessive, inadequate, or unfairly discriminatory, he can order the modification of the rate on a prospective basis.

2. What type of coverage will I need?

To help real estate Buyers and Sellers make an informed decision as to the level of coverage to choose, we have created a side-by-side comparison chart that compares the risks covered by the ALTA Homeowner’s, Standard, and Extended Policies that we offer at Ticor Title.  Download & view the chart by clicking the link below:
Residential Title Insurance Policy Types

3. Who Pays for the title insurance premium in Washington State?

In Washington State, the Seller customarily pays for the Buyer’s owner policy and the Buyer pays their lender policy.

4. Who determines which title company will provide the coverage?

Ticor’s Current Ratings:

Financial Strength/ Claims Paying Ability Ratings
Standard & Poor’s – A
Moody’s Investors Service – A3
Fitch Ratings – A-
A.M. Best Co. – A-


Lace Title Rating Corporation (Claims Paying Ability Rating)
Ticor Title Insurance Company – ADemotech, Inc. (Financial Stability Rating)
Ticor Title Insurance Company – A’

Typically the title insurer is already chosen by the Seller in order to examine title and flush out potential title issues on the property before an offer is made on the property.  The Buyer may decline to use the title company previously specified by the Seller and use a title company of their choosing.  However, if the Seller previously received a preliminary title that Buyer declines to use, the Buyer shall pay any cancellation fees owing to the original title insurance company.

5. Should I be concerned about the claims paying ability of my title insurance provider?

A title insurance provider’s claims paying ability is determined by the amount of reserves held to pay claims.  Due to the state of the real estate market over the last 4 years, a title insurer’s claims paying ability has become more critical as the number of claims filed have sharply increased.

Do you have comments or thoughts regarding any of these questions?

Please share below!

Betrayed with an Uninsured Deed…

Beware of uninsured deeds.An escrow officer in one of our sister operations opened a purchase transaction for $347,000. She ordered the title report and the order was assigned to Casandra, a commercial title officer. Casandra issued the report reflecting two owners of record: Maysa Alhelow, a single woman and Thomas Paul Helo, a married man as his sole and separate property.

The escrow officer processed the order and once she received all signed documents and monies, shipped the documents for recording. It is normal and customary in California, where the property is located, to record prior to disbursing the escrowed funds. The escrow officer was waiting for recording confirmation.

Uninsured Deeds

Uninsured deeds in the chain of title always pose a whole new level of risk for a title insurance company. Title officers are taught to scrutinize those types of deeds for obvious signs of forgery or other misconduct on the part of the grantors and grantees. The title officer in this particular order did just that and ultimately halted a transaction that would have inevitably caused a title claim.

When the recording package arrived Casandra noticed only Alhelow signed the deed to the new buyer, and not the co–owner Thomas Paul Helo. Casandra called the escrow officer and asked why there was no deed from Thomas. The escrow officer explained that she was told the owners had recently recorded a deed, wherein Thomas conveyed his interest in the property to Alhelow.

Casandra located the recorded deed from Thomas to Alhelow.
She inspected the deed and noticed the following:

  • Deed was uninsured
  • Deed was not notarized by a Company–approved notary
  • The signature of Thomas Paul Helo appeared to be VERY different than his signature on other recorded documents

A New Deed was Needed

As a result, Casandra called the escrow officer and insisted Thomas sign a new deed in the presence of an employee or Company–approved notary. The escrow officer called the number she had for Thomas, but Alhelow answered the phone. The escrow officer explained the need for a new deed from Thomas. Alhelow responded Thomas could not possibly come into the office to sign the new deed as he was in Los Angeles and would not be returning anytime soon. The escrow officer informed her it was not a problem as Thomas could sign at one of our Los Angeles offices. Alhelow said she would contact Thomas.

In the meantime, the escrow officer did some research, found a Los Angeles number for Thomas and contacted him directly. When she explained the need for him to sign a new deed, Thomas confirmed he did not sign the first deed conveying his interest to Alhelow, and he had no knowledge the property was even being sold!

“…and he had no knowledge the property was even being sold!”

The escrow officer asked Thomas if he was even interested in selling the property and he stated, “No.” The escrow officer immediately resigned from the transaction, knowing full–well Thomas was not going to agree to the sale.

A Forgery Indeed

It was later discovered that Thomas’ brother, Kahir Tim Helo, had actually forged Thomas’ signature on the deed. And the escrow officer and Casandra discovered Kahir is Alhelow’s boyfriend! Ruth C. Escobar, who notarized the forged deed, works for a tax preparation office in Bakersfield. It is unclear as to what identification Kahir provided the notary.

Casandra’s keen observation of the uninsured deed disclosed a forgery and prevented a future claim from the real Thomas Paul Helo.

Our Title Insurance Policies Insure Against Forgery

Thomas’ brother and his brother’s girlfriend were attempting to sell the property without Thomas knowing, so they would not have to split the proceeds with him. Our title insurance policies insure 100% against forgery. Had Our Company closed and insured the transaction, and later Thomas Paul Helo made a claim to his interest in the property, we would have had to defend our policy holder – the buyer. As the insurer, we would have had to settle with Thomas in order to obtain a valid deed and cure the title defect for the new owner of the property.

Thoughts or questions? Please share below!

The Probate Path – Single at Death

Recent blogs have discussed probate issues, or problems associated with a “lack of probate.” If a home is to be sold but the record owner is deceased it is imperative to identify who now owns the property. The transaction can then close if the proper parties execute a deed to the buyer.

We are not talking here about joint tenancy or trust property, but rather where title was vested simply in an individual.

There are three basic situations when the owner has died:

Probate Paths - Single at Death

Click the image above to view a printable version of the chart.

  • First, the owner was single – not married or a domestic partner.
  • Second, the owner was married or a domestic partner, but it was separate property (not community property).
  • Third, the owner was married or a domestic partner and it was community property.

Of course, each of these has additional variations, mostly relating to whether the deceased had a will, and whether or not the estate (with or without a will) is being probated. If there is a probated will, devisees (those named in a will) will get the property or the proceeds from the sale if it’s sold before the probate is closed. If there is no will, then state law provides who inherits. It can get complicated to work it all out.

It may be helpful in such cases to see a chart following the path to a successful closing. In this and future blogs we will show basic diagrams applicable to each situation. This month we start a fairly simple one – a deceased owner who was single at the time of death.

Deceased Owner – Single at Death

Sam Smith, a widower, just died. The home is listed by Rolf, who tells the Realtor® that he is Sam’s nephew and only heir. The title company gets the order and finds the death certificate, but doesn’t find a probate case. Having no other information at this time, the title company vests title in “the heirs and/or devisees” of Sam, and asks Rolf for a “lack of probate” affidavit. This affidavit is designed to identify relevant facts to allow the title company to assess its risk, including whether or not there is a will or a probate (which could be any county in Washington or in another state), the size of the estate (to determine if estate taxes apply) and other valuable information. The goal is to find out who can actually convey the land (and for escrow, who will get the proceeds of the sale), so that the risk is at least minimized, if not eliminated, that an unknown heir will come forward after the title has been insured.

No Heirs?

At some point, if there are no heirs at all, the home would eventually escheat to the State of Washington. In such cases, a probate may be opened, but here there are no easy answers. Usually creditors will open a probate and attempt to sell the property, with excess proceeds going to the state after the sale of the home.

Rolf completes the affidavit, and says that Sam never had children, and that his parents are also deceased. Sam did have a sister, but she is also died. She did, however, have an only son – Rolf who in turn is Sam’s nephew.

The laws of descent (RCW 11.04.015) provide that inheritance would be in the following order:

  1. Spouse, if any, or if none, then
  2. Children if any, or if none, then
  3. Parents, if alive, or if not, then
  4. Siblings, and if none survive him, then
  5. Grandparents, or if none, then
  6. Children or grandchildren of the grandparents and on down the line.

So, it would appear that the nephew is the sole inheritor and can sell the house. Now, it’s only the word of the nephew on the affidavit, but it is sworn under oath. It’s a judgment call on the part of the title company to decide the veracity of the nephew – is there a hidden will? Other heirs he’s just not mentioning? It is a risk, but the sworn affidavit is something for the title company to go on.

The chart below gives a simple guide to follow with these facts. There are four “paths” to follow. The first doesn’t apply, because although there is no will, neither is there a probate. The second doesn’t apply since there is neither a will nor a probate. The third doesn’t apply, because there is no will. So, we are left with the fourth path – no will and no probate. It requires the lack of probate affidavit, and a deed only from Rolf (as the sole surviving heir of Sam Smith, deceased), the child of a sibling, because Sam left no living kids, grandkids, parents, brothers or sisters.

Probate Paths - Single at Death

Click the image above to view a printable version of the chart.

Questions or comments?  Please share below!

Ticor Title Fact Sheet – Q3 2011

The financial strength and claims paying ability of a title insurance company is very important in these times of change in our industry. With Ticor Title in the Pacific Northwest you can rest assured that our commitment to you is established on a rock solid financial foundation. The fact sheet below will give you a sense of how we did in Q3 2011.

Ticor Title Seattle - Q3 2011 fact sheetTicor Title is a member of the Fidelity National Financial family of companies (“FNF”); the leading provider of title insurance through its title insurance underwriters – Fidelity National Title Insurance Company, Chicago Title Insurance Company, Commonwealth Land Title Insurance Company and Alamo Title Insurance. FNF underwriters issue more title insurance policies than any other title company in the United States.

As a company, we produced another strong quarter despite the continued difficult real estate market. This achievement can be attributed to our local employees’ ability to manage challenging market conditions and take advantage of opportunities as they arise. One such opportunity came with the meaningful decline in residential mortgage rates beginning in August.

This decline led to a significant increase in refinance order volumes. Total refinance open orders per day in August increased nearly 30% over July, and September totals remained nearly equal with August levels. As a result of the decline in mortgage rates, the quarter’s mix of business favored refinance transactions. Overall, during the quarter our direct operations opened 596,000 total orders and closed 378,800 orders.

Our commercial title business was strong again during the third quarter and generated over $99.1 million in revenue, which accounted for more than 26% of total direct title premiums in the quarter compared with 19% in the same quarter of 2010.

Collectively, the FNF title brands remain the largest and the most profitable in the industry. As always, we remain committed to managing our business with discipline, providing the best possible customer service, and remaining the financially strongest title insurance provider for our policyholders, clients, and partners.

Which Title Insurance Policy Should I Choose?

Standard, Extended, and ALTA Homeowner's Title Insurance Comparison

What is the difference between the various types of owner’s title insurance policies?

We hear this question often. There are three types of owner’s policies; Standard, Extended, and ALTA Homeowner’s. It’s important to note that the ALTA Homeowner’s Policy is specified by default on the NWMLS (Northwest Multiple Listing Service) Form 22.

Title Insurance Choices

Why would the ALTA Homeowner’s policy be the top choice? The ALTA Homeowner’s policy offers the highest level of protection for homeowners that exceeds the coverage of the Standard or Extended policies. Some home buyers may not be aware of the risks to title that exist and thus not understand the explicit value of broader coverage. Nonetheless, buyers should know that they always have a choice.

What makes the ALTA Homeowner’s policy unique?

We’ve written an article specifically about the ALTA Homeowner’s policy that explains the benefits to the homeowner, the deductibles, post closing coverage, and the cost.  For further information, please click the following link:

ALTA Homeowner’s Policy in Plain English

Standard, Extended, and ALTA Homeowner’s comparison

In comparing the three policies, it’s easier to make an informed decision if you can see the risks covered in a list or tabular format. The side-by-side title policy comparison below will make it clear what makes each policy unique.

Please keep in mind that if you have questions regarding your title insurance policy or level of coverage, we are here to help.

Policy Protection Against the Risks of:

ALTA Homeowner’s Standard Extended
Record defects, liens, encumbrances, adverse claims or other matters not known or disclosed to the new owner that attach before date of policy
Forgery or Fraud in connection with the execution of documents
Undue influence on Grantor or mental incompetence of Grantor
Undisclosed or missing heirs
Wills not properly probated, mistaken interpretation of Wills and Trusts
Conveyance by minor(s), Conveyances by Corporation or Partnership without proper legal authority
Incorrect legal descriptions, non-delivery of deeds
Delivery of Deed after Death of Grantor
Clerical errors in recorded legal documents
Unmarketability of title as insured or lack of legal access
Unrecorded liens
Survey and Boundary questions
Claims of parties in possession not disclosed by the public records
Easements or claims to easements not disclosed by public records
An existing violation of a subdivision law or regulation affecting the Land: 

  • You’re unable to obtain a building permit
  • You are forced to correct or remove the violation; or
  • Someone else has a legal right to, and does refuse to perform a contract to purchase the Land, lease it or make a Mortgage on it.

This covered risk is subject to:

  • A customer deductible amount of either 1% of Policy Amount or $2,500.00. (whichever is less)
  • Title Company’s Maximum Liability is $10,000.00
Certain zoning issues that force you to remove or make modifications to your existing structure. 

This covered risk is subject to:

  • A customer deductible amount of either 1% of Policy Amount or $5,000.00. (whichever is less)
  • Title Company’s Maximum Liability is $25,000.00
You are forced to remove your existing structure (s) because it (they) encroaches onto your neighbor’s land. 

This covered risk is subject to:

  • A customer deductible amount of either 1% of Policy Amount or $2,500.00. (whichever is less)
  • Title Company’s Maximum Liability is $25,000.00

Post Closing Coverage:

Another party owns an interest in your title
Another party has rights affecting your title resulting from leases, contracts or options
Another party has rights affecting your title resulting from leases, contracts or options
Another party has an easement on the property
Your title is defective
Another party has the right to limit the use of your land
Your neighbor builds any structures, after the policy date, other than boundary walls or fences, which encroach onto the land

 

Condo or Co-op, What’s the Difference?

Seattle Condo or Co-op

Washington has a lot of condominiums, but also its share of cooperatives, especially in the Seattle metro area. On the surface they may seem similar. So what exactly is the difference between a Condo and a Co-op?

What’s a Condo in plain english?

A Type of Subdivision

Both condo and co-op units are a type of land subdivision but neither requires city or county review or approval as is done with a platted lot.

A condo unit is created by a state statute (RCW 64.34) which requires a complex and expensive survey to locate each unit as a “parcel” of land. The unit occupies airspace within the main parcel. The unit’s boundaries are in simplest terms a “box” with six sides (typically the walls, floors and ceilings of what looks like an apartment in a building). Everything within the box is the unit, owned 100% by the unit owner. Title to the unit automatically includes a percentage interest (as tenant in common with all owners) in the common elements – everything outside the box. The common elements are not a separately owned or taxed parcel. While a homeowners’ association manages the property pursuant to the recorded declaration, it owns no real property.

Each unit is taxed independently, and can be sold and mortgaged just like a platted lot. A failure to pay taxes or the mortgage on a unit has no bearing on the title to any of the other units, and thus no lien can arise solely on the common elements such that it would affect the title to any unit or the project if foreclosed.

What’s a Co-op in plain english?

A co-op unit is similar to a condo unit one respect: the space occupied by the unit owner is usually also a “box.” But, there is no survey defining the location of the boundaries, so there is no “legal” description of the unit that meets the standard of a condo unit or a platted lot. Also, all of the property, including the units and the common elements, is owned by a cooperative corporation, which also acts as the homeowners’ association. A co-op buyer gets stock in the cooperative corporation (only unit owners can own the stock) and what’s called a proprietary lease to the unit that allows exclusive possession. This unrecorded lease is often for a nominal monthly amount, although assessments can be significant.

“This means, of course, that if assessment collections fall short all unit owners risk losing title to their units in a foreclosure.”

The entire co-op property is a single tax parcel and especially in newer projects is often encumbered by a mortgage. It’s up to the association to pay the taxes and the mortgage, with a significant monthly homeowner assessment to cover those expenses. This means, of course, that if assessment collections fall short all unit owners risk losing title to their units in a foreclosure.

Co-op Membership

The documents creating a cooperative, unlike a condominium declaration, are not recorded, and in many cases the association does not want them to be. Most co-op boards also have stringent membership requirements, including significant financial assets that make it harder for first time buyers to qualify. And, in addition to pre-approval of buyers by the board, it often has first refusal rights when a co-op unit owner wants to sell. One advantage of all this is that co-op projects tend to be more stable in an otherwise changing real estate market. At the same time, it can be more difficult and time consuming to sell a unit even when market conditions are good because the pool of qualified buyers is smaller.

Condo vs. Co-op Seattle(Photo credit: Jeff Croft via Flickr)

Unit financing can be had, but it’s usually not a real estate loan. Rather, a bank might offer a personal loan secured primarily by the unit owner’s shares of ownership in the co-op corporation. Some banks do offer financing similar to real property loans, including some secondary market backing. But even with a good loan-to-value ratio (say 80%) the amount of any blanket co-op mortgage must be subtracted from the value of the land. A co-op owner cannot pay off a portion of the mortgage allocable to that unit, so the “equity” that is actually available for a real property mortgage on a single unit can be quite small. Title insurance, which may be available if the unit lease is recorded, is often not utilized or of limited value to a buyer or lender.

Co-op transactions involve specialized paperwork because of the transfer of the stock interest and lease (or a new lease from the association) and requires a Realtor® experienced in helping pull it all together.

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