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Frequently Asked Questions
- What does the term title refer to?
- What does the term clear title refer to?
- What does the term cloud on title refer to?
- What does the term defect in title refer to?
- What does the term failure of title refer to?
- How does title pass from one owner to another?
- What does the term chain of title refer to?
- What does the term title insurance refer to?
- How long does title insurance protect the new property owner?
- What types of title insurance policies are available?
- What purpose does a title insurance company provide?
- How much does title insurance cost?
- Who decides on the selection of a title agent?
- What do the terms 1031 exchange and like-kind exchange refer to?
- What does the acryonym FIRPTA refer to?
What does the term title refer to?
The term title refers to legal ownership of property, legitimizing your right to peaceful enjoyment of the property you own within restrictions or limitations of use imposed by governmental entities.
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What does the term clear title refer to?
Clear title refers to legal ownership of property without blemish.
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What does the term cloud on title refer to?
Cloud on title indicates that one or more inconsistencies exist that may blemish legal ownership if not corrected. Once corrected, clear title is attained.
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What does the term defect in title refer to?
Defect in title indicates an encumbrance or a more severe problem requiring correction before proceeding.
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What does the term failure of title refer to?
Failure of title indicates a severe problem that completely prohibits the ability to convey ownership from one owner to the next.
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How does title pass from one owner to another?
Title passes from one owner to another through a will, inheritance, operation of law, grant, court decree, etc.
In most cases, the actual conveyance occurs through a deed, which is a written instrument to be recorded in court.
The individual(s) conveying ownership are called grantors, and the recipient(s) are called grantees.
The written deed must be delivered by the grantors, then accepted (and executed through signatures) by the grantees.
A deed must be notarized before it can be recorded in court.
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What does the term chain of title refer to?
Chain of title refers to the chain of ownership created by the repeated buying and selling of a given property.
Each time a property transfers ownership, the transaction is recorded in the appropriate county court and is a publicly available document.
Over time, a chain of ownership results from such transactions.
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What does the term title insurance refer to?
Title insurance is an insurance policy issued by an insurance underwriter that guarantees property ownership and peaceful enjoyment against legal claims, liens, or judgments associated with the given property after the purchase is completed.
Title insurance protects against losses arising from events that occur prior to the date of the policy.
Unlike real property insurance and casualty insurance, where coverage starts the day such a policy is issued, title insurance coverage spans the past, guaranteeing that events prior to ownership to do not result in a loss.
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How long does title insurance protect the new property owner?
Title insurance provides protection for as long as current property ownership lasts.
When a property owner sells the given property, the new owner's title insurance policy covers them from losses incurred during previous ownership.
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What types of title insurance policies are available?
Two types of title insurance are available.
Owner's title insurance offers protection to the owner against defects in his/her title to real estate.
Lender's title insurance protects lender loans against defects and losses until the mortgage is paid in full.
Therefore, a lender's title insurance policy does not provide coverage to the owner in the absence of owner's title insurance.
A new owner's title insurance policy is unnecessary when refinancing an existing property; however, the lender will require the purchase of a new lender's title insurance policy.
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What purpose does a title insurance company provide?
When buying and selling real estate, legal statutes require the inclusion of an independent third party to facilitate the performance of escrow, closing, and settlement, as well as the issuance of relevant title policies.
A full-service title insurance company performs the necessary search regarding the property, conducts the requisite due diligence to review chain of title, identifies any inconsistencies, liens, or judgments, issues a commitment to insure, manages funding through escrow accounting, coordinates activities between buyers, sellers, realtors, mortgage brokers, lenders, and other parties, conducts the closing, disburses funds, issues the title insurance policies to both buyer and lender, and records all necessary documents to establish the new ownership in the given property.
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How much does title insurance cost?
Title insurance costs vary and are broken down into fixed costs and variable costs.
Fixed costs are one-time costs that typically include the title insurance premium (including any applicable endorsements), document recording fees, stamp fees, intangible taxes, city assessment, etc. The title insurance premium is calculated based on the purchase price of the given property. Most of these costs are formulated and regulated by the government; as such, they remain constant across all title insurance companies.
Variable costs are service charges such as search and examination fees, processing and settlement fees, document storage and handling fees, notary charges, survey charges, inspection and appraisal fees, etc.
Many of these costs are performed by separate entities and therefore priced by outside service providers.
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Who decides on the selection of a title agent?
The buyer or seller has the right to choose a title company.
With the advent of the Internet and the Web, real estate buyers and sellers are increasingly educated on how to best select a title agent.
While we at Century Title are happy to make a recommendation, the choice is ultimately in your hands.
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What do the terms 1031 exchange and like-kind exchange refer to?
Internal Revenue Tax Code Section 1031 allows taxpayers to defer income tax on capital gain realized from the sale of investment property (relinquished property) held by the taxpayer for investment or productive use in a trade or business by reinvesting the proceeds in another property of like kind (replacement property).
A 1031 exchange is possible only when you sell real estate held for investment purposes; such an exchange does not apply to the sale of your personal residence.
To ensure taxpayers fulfill the requirements of the exchange, taxpayer access to sale proceeds is restricted during the exchange period by requiring a qualified intermediary, trustee, or escrow agent to hold sale proceeds and disperse the same for the replacement property.
At closing, proceeds are transferred to the facilitating third party to hold until they are used to acquire a new property.
The seller is allowed no more than 45 days from such sale to identify a like-kind property where sale proceeds are applied.
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What does the acryonym FIRPTA refer to?
Part of the Internal Revenue Tax Code, the Foreign Investors in Real Property Taxation Act of 1980 (FIRPTA) was enacted with the intent of recovering at least a portion of the taxes (based on sale price) due on the sale of real property by a foreign seller, where the term foreign seller refers to a non-resident alien individual, corporation, partnership, trust, or estate.
For transactions over $300,000, FIRPTA requires the buyer withhold 10% of the purchase price from the seller at closing.
Within 20 days of the closing, this 10% amount is to be remitted to the IRS with Forms 8288, 8288A, and 8288B completed and signed by the buyer.
All parties to the transaction must have a Taxpayer Identification Number (TIN).
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Information provided above is neither intended nor should be construed as legal or financial advice. All provided information is designated to be informative and not necessarily correct. Readers are expected to conduct their own due diligence in accordance with properly authorized legal and financial counsel.