Recordation, Title Insurance, & Settlement Flashcards Preview

Modern Real Estate Practices > Recordation, Title Insurance, & Settlement > Flashcards

Flashcards in Recordation, Title Insurance, & Settlement Deck (27):
1

Public Recording System - Keypoints

  • state laws determine policies & procedures that regulate recording; also determine responsibility for organizing & maintaining recorded documents
  • recording a document does not provide validity

2

Recording Process

5 steps...

  1. Note date & time the doc is filed.
  2. Assign recording number.
  3. Copy doc into publlic record (photocopy/digital image).
  4. List doc in grantor & grantee indexes.
  5. Return original doc to indicated party.

3

System Allowances

  • allows users to post claims
    • gives constructive notice
    • establishes priority of interests (1st in time, 1st in right)
    • grantee who does not record deed rishs having another claim title to property
    • creates position for doc base on recording date & time
  • allows users to search claims
    • inspect property for actual notice & visible claims
    • inspect public records for contructive notices (liens)
    • buyer's due diligene to inspect property and public records.

4

Requirements for Recording

  • Docs usually recorded:
    • deeds
    • mortgages/trust deeds
    • contracts for deed
    • easements
    • long-term leases
  • recorded docs should be executed (signed)
    • some states require notarization/acknowledgement
  • paying recording fee & transfer tax (refer to state law); typically paid when recording the deed

 

5

Subordination

  • clause in mortgage/deed or trust in which lender permits a subsequent mortgage to take/change position for priority.
  • allows mortgage to maintain original position
  • previous mortgage refinanced? secondary mortgage continues subordinate position

6

Marketable Title and How to Determine

  • ownership free from reasonable doubt; buyers goal is to obtain marketable title.
  • to be marketable, must:
    • disclose no serious defects
    • not expose purchaser to litigation or threaten the quiet enjoyment of property
    • convince purchaser they could sell or mortgage the property at a later time
    • any questions of marketable title have to be raised before acceptance of the deed

7

Title Search

Process & Purpose

  • examiner reviews public records pertaining to property
  • search is from the present to original source of title
  • process used to establish chain of title (successive ownership documents linked together); seeking an unbroken chain
  • title clouded if errors or missing documents
    • seller will need to clear title to convey the property
  • marketable title act will determine how far back the search needs to be conducted.

8

Abstract of Title & Attorney's Opinion of Title

  • ABSTRACT: historical summary of recorded docs affecting title & created through title search
  • seller expected to produce updated abstract
  • buyer's attorney examines and determines marketability
  • attorney renders opinion of title after tracing chain of title
    • shows current status of rights
    • lists objections
    • a.k.a. certificate of title

9

Title Insurance

 

  • contract that protects policyholder from losses arising from defects in the title; protects the insured from an event that occured before policy was issued.
  • beset method for determining marketable title

10

Title Insurance - Process

After examining the public records, title company will:

  • issue title report (current condition of title) and commitment (execptions/defects/encumbrances not included in policy)
  • buyer can offer objections prior to closing

11

Standar Coverage Title Ins. Policy

  • protects against all problems found after closing; excludes exceptions found before closing & listed in title report.
  • covers matters of record including:
    • errors in title examination
    • errors in abstract
    • errors in public record (misfiled documents)
    • hidden defects (forgery, incompetency, misrespresented marital status, etc.)

12

Extended Coverage Title Insurance Policy

  • protects the same as standard policy does as well as problems not​ a matter of public record such as:
    • parties in possession/adverse possession issues
    • matter of survey (encroachments)
    • gap period (time between issued commitment date & date deed is recorded)

13

Types of Insurance Policies

  • Owner's Policy: protects owners/buyers & heirs while they hold interest
    • cost based on sale price of property
    • paid for by buyer/seller/party listed in contract
    • coverage continues until property changes title
  • Mortgagee's Policy: protects mortgagee/lender
    • coverage base on loan amount
    • often paid by buyer, but seller could pay if in contract
    • coverage diminishes with each payment and ceases to exist when loan is satisfied

14

Suit to Quiet Title

  • court hearing to determine ownership, recognize valid claims, & quiet invalid claims.
    • used to clear title & est. ownership under adverse possession
  • lis pendens is filed & all parties must present evidence of the claim in court
  • coourt hears & judge claims
  • once court order is recorded, the cloud on the title is cleared

15

Enivronmental Issues

RE Agent's Role & Key Points

  • Fall under EPA
  • RE should know:
    • issues common to area
    • signs of contamination
    • inform & suggest investigation into any EI
  • Considered material facts - must disclose
  • If broker/agent suspects, must be disclosed
  • Broker/agent should suggest inspection, not inspector
  • Properties w/high contamination levels may need cleaning before selling can take place

16

Asbestos

  • Building material - can cause respiratory diseases
  • Used before 1978 in many bldg materials (pipe, insulation, flooring, siding, etc.)
  • Harmful if fibers are friable (broken & airborne)
  • Bldg demo'd or reno'd, abatement (removal) done prior to
  • Encapsulation (sealing in place) is the best alternative (no exposure to friable fibers)

17

Lead-based Paint - What it Means

  • elevated lead levels can cause neuro disorders; pregnant women & children most at risk
  • Fed law requires sellers to disclose if house built before 1 - 1 - 1978

18

Lead-based Paint - RE Requirements

  • RE Responsibility:
    • Disclose location of any known LBP
    • Provide any reports
    • Give EPA pamphlet on lead poisoning
    • Offer buyer 10-day option period
      • Buyer may waive
      • If not waived, buyer may terminate during 10-day inspection period
    • Sellers not required to do inspection or removal
  • Listing Broker: responsible for having signed acknowledgements from buyer, seller, and RE agents.
  • Prop managers/landlords required to give similar disclosure and EPA pamphlet
    • Tenant/Renter does not have to be given opportunity to test or have removed

19

Lead-based Paint - RRP Program of 2010

  • Renovation, Repair, & Painting Program
    • covers any professionals performing work that disturbs LBP
  • Professionals dealing with LBP must:
    • be certified in containment & cleanup
    • provide owners with Renovate Right brochure before starting work
    • prop owners working on personal prop exempt, but must be in compliance if working on rental property
      • considered material fact if reno done in violation of this.

20

Radon

  • naturally occuring odorless, radioactive gas
  • moves from ground to atmosphere
  • creates hazard when trapped in a building
  • can cause lung cancer
  • impossible to detect w/o testing, done by a professional
    • will recommend plan for mitigation (plan to lower levels)
  • typically mitigated by adding ventilation systems to move gas out of bldg

21

Carbon Monoxide (CO)

  • odorless gass, byproduct of combustion
  • improper vetilation/equipment malfunction can cause a build-up, leaing to death
  • can be detected with CO monitor/detector
    • many states require this
    • inspectors should test for build-up

22

Mold

  • toxic mold created by excess moisture
  • can grow anywhere there is water, oxygen, & organic food source
  • if found, can be harmful and requires remediation (removal)
  • no federal disclosure laws
  • buyers can have inspector test for it
  • brokers should be aware of indicators (musty smell, water damage, high humidity, water leaks, etc.)
  • may not be covered by homeowner's insurance

23

Environmental Impact Statement (EIS)

  • Describes potential impact of a proposed project on local & regional:
    • air
    • wetlands
    • land
    • environment
  • mandatory for gov't projects & poss. required for private development

24

Real Estate Settlement Procedures Act (RESPA)

  • standarizes closing practices for 1 to 4 family res properties financed by federally related loans
  • regulates lenders, title companies, & RE licensees
  • requires lenders to give GFE (Loan Estimate) of all closing costs w/in 3-business days of application
  • requires lenders to give HUD-1 (Closing Disclosure) at closing
  • restricts amount of advanced escrow pmts & prohibits kickbacks

25

Escrow and Closing

  • some states use escrow agents for their closings
  • some states have closing across the table (NOT TEXAS)
  • escrow agent/holder is disinterested party, assists carrying out transaction according to purchase contract
  • listing brokerage firm normally responsible for over all closing (NOT TEXAS)

26

Closing Statement - What is it/What does it do?

  •  account of each party's debits & credits
  • debit to buyer: anything that increases amt of $ to bring to closing (sales price, brokerage fee, new loan origination fees, etc.)
  • credit to buyer: anything that decrease amt of $ brought to closing (earnest money, new loan amount, interest on assumed mortgages, etc.)
  • debit to seller: anything that decreases amt of $ they walk with (brokerage fees, owner's title insurance, payoff of existing loan, etc.)
  • credit to seller: anything that increases amy of $ they walk with (sales price)

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