Closing and Title Costs
It's the big day.
The day you go to the title or escrow company, sign your name on the dotted
line, hand over a check and prepare to take ownership of your new home.
It's also the day that you and the seller will pay "closing" or settlement
costs, an accumulation of separate charges paid to different entities for the
professional services associated with the buying and selling of real property.
It's too often a day filled with uncertainty and stress.
To help you better understand this confusing subject, the Land Title Association
has answered some of the questions most commonly asked about title, closing
and closing costs.
What services will I be paying for when I pay closing costs?
You
will usually be paying for such things as real estate commissions, appraisal
fees, loan fees, escrow charges, advance payments such as property taxes
and homeowner's insurance, title insurance premiums, pest inspections and the
like.
How much should I expect to pay in closing costs?
The amount you pay for closing costs will vary; however, when buying your
home and obtaining a new loan, an estimate of your closing costs will be provided
to you pursuant to the Real Estate Settlement Procedures Act after you submit
your loan application. This disclosure provides you with a good faith estimate
of what your closing costs will be in the real estate process. An itemized
list of charges will be prepared when you close your transaction and take title
to your new property.
Can I pay for my closing costs in installments?
No, and it is easy to understand why. Many different parties will have fulfilled their responsibilities and be awaiting payment upon closing. The title or escrow company will disburse money to those parties, pursuant to the escrow instructions, when funds are available.
Will I be allowed to write a personal check to cover my closing cost?
Your closing funds should be in the form of a cashier's check, issued by an institution from the state of your purchase, made payable to the title company or escrow office in the amount requested. A personal check may delay the closing or may be unacceptable to the title or escrow company. An out-of-state check could also cause a delay in your closing due to possible delays in clearing the check.
How much can I expect to pay for Title Insurance?
This point is often misunderstood. Although the title company or escrow office
usually serves as a meeting ground for closing the sale, only a small percentage
of total closing fees are actually for title insurance protection.
Your title insurance premium may actually amount to less than one percent
of the purchase price of your home, and less than ten percent of your total
closing costs. The title policy is good for as long as you and your heirs own
the property with the payment of only one premium.
Why are separate owner's and lender's title insurance policies issued?
Both
you and your lender will want the security offered by title insurance.
Your home is an important purchase, and you will want to be certain your
home is yours, all yours. Title insurance companies insure your rights and
interests in order to protect you against claims.
Your lender is looking to insure the enforceability of their lien on your
property and marketability. What is meant by "marketability"? Local lenders
will "originate" a loan here, and, often, sell it to an out-of-state investor.
This investor, who may never see the property, needs to know that he has a
valid and enforceable lien. Title insurance is the way of making certain. Without
a current title policy, the loan is essentially unmarketable.
What does my Title dollar pay for?
Title insurers, unlike property
or casualty insurance companies, operate under the theory of "risk elimination."
Risk elimination can only be accomplished after an intensive period of risk
identification.
Title companies spend a high percentage of their operating revenue each year
collecting, storing, maintaining and analyzing official records for information
that affects title to real property. The issuance of a title insurance policy
is highly labor-intensive. It is based upon the maintenance of a title "plant" or
library of title records, in many cases dating back over a hundred years. Each
day, recorded documents affecting real property are posted to these plants
so that when a title search on a particular parcel is requested, the information
is already organized for rapid and accurate retrieval.
Trained title experts are able, with the aid of their extensive title plants,
to identify the rights others may have in your property, such as recorded liens,
legal actions, disputed interests, rights of way or other encumbrances on your
title. Before closing your transaction, you can seek to "clear" those encumbrances
which you do not wish to assume.
The goal of title companies is to conduct such a thorough search and evaluation
of public records that no claims will ever arise. Of course, this is impossible--we
live in an imperfect world, where human error and changing legal interpretations
make 100 percent risk elimination impossible. When claims do arise, title insurance
companies have professional claims personnel to make sure that your property
rights are protected pursuant to the terms of your policy.
To conclude, when you pay for your title insurance policy, you are paying
for a team of professionals who have worked together to deliver you a title
insurance policy which represents protection for your ownership of real property.
Who can I look for straight answers on Title, Closing, and closing costs?
Rising Realty.
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