Closing Costs - Title Policies

The Costs Of Closing The Sale

Wouldn't it be great to just find a property you liked and simply trade money for the property, without all of the other things that go along with a house purchase? Perhaps in past centuries it went like that, but today there is much more to think about when it comes to purchasing a property. There's more out-of-pocket expense then the down payment. Closing costs can take between 2 to 4 percent of the purchase price, depending upon origination fees the lender charges to make the loan and the points associated with that aspect of the purchase. On a $300,000 property, that could look like anywhere between $6,000 to $12,000-and it can even go higher!

Prepaids And Recurring Costs

Some of the fees that are paid are non-recurring closing costs while others are recurring costs, also known as prepaids. The prepaids include the various insurances such as fire and flood as well as mortgage insurance and property taxes. The non-recurring closing costs are those that are one-time charges made at the point-of-sale and closing. Such things as transfer taxes, lender fees, home inspection fees and legal costs all fall into this category. Escrow (or closing costs) as well as Title Policies are additional. Of course, this is by no means an exhaustive list of costs. There are many more that are part and parcel of closing a housing deal.

Title Insurance

Title insurance companies begin their search of title (registered owners) in the US from the point of claim from the US patent (a long, long time ago). In order to protect you, the buyer, from errors made by people, title insurance is an important aspect of the closing costs. All of this is necessary to ensure that the property you are buying is, indeed, the property you are buying. It sounds like a lot of double-talk, but the truth is that unless the title to the property you are buying is clear, you may end up in a dispute over whether the seller actually had the right to sell it to you. So, it's pretty important.

Searching The Title

The chain-of-title begins with a search of the public records, mostly stored on computer these days, to determine the division of land (in terms of miles, acres, plots and lots). The actual searches begin with the most recent deed and searches from the name of the current title holder backwards until such time as the grantee acquired the property. The search then extends to the place where the grantor gained title as the grantee. As you can imagine, the parcels of land in the property descriptions become larger and larger until eventually you end up at the US Patent.

Sometimes the chain-of-title is broken, so the title searchers also look for proof that encumbrances against the property were paid off, for easements, rights-of-way, and other factors affecting the property. Death, marriage, and tax records are also searched.

Title Insurance Coverage - What's Covered

Title insurance coverage usually falls under one of these three headings; Owners, Lender's or Extended Coverage. The Basic Owners Policy covers such things as clear title to the property, incorrect signatures on documents, forgery or fraud, problems with recording, restrictive covenants, encumbrances or judgments.

The Lender's Title coverage deals mostly with liens against the property, easement and access rights, and defects or other unrecorded documents. Extended Owner's coverage encompasses building permit violations and covenant violations from previous owners, maps of subdivisions, living trusts, damage caused to the structure as a result of mineral extractions and a variety of forgeries and encroachments after the title insurance is issued.