Title Defects | Unknown Liens

Liens are a common type of title defect that can interfere with the transfer of ownership rights surrounding a real estate property. Essentially, a lien is a security instrument representing a creditor’s (or legal entity’s) interest in a property as collateral for a debt. If the lienee fails to uphold their end of the obligation, the creditor has a legal claim to the property in some capacity. In a number of cases, unresolved liens impede the process of transferring the deed of a property to a new party, creating a title defect or barrier to closing.

Common Types of Liens

Liens may be held by financial institutions and additional creditors, government municipalities, tax authorities, and other parties. Some of the most common types of liens include:

-Mechanic’s liens

-Tax liens

-Judgment liens

-Bank (mortgage) liens

-Child or spousal support liens

-HOA (homeowner association) liens

Will a title search identify unresolved liens?

During the settlement process, a title agent or an attorney will conduct a thorough title search in an effort to identify conditions that may prevent ownership transfer or jeopardize a homeowner’s property rights. Since liens are recorded in public records, a title search should generally uncover any outstanding liens associated with the property. 

How are liens resolved?

Liens may be resolved in a number of ways, which are largely based on the nature of the lien. In many cases, liens must be paid off or satisfied according to the lien holder’s discretion before being released. Sellers may also attempt to negotiate the dollar amount of a lien into the contract price of the property. Liens recorded erroneously may be disputed through legal proceedings. The manner in which liens are resolved may also vary by state or municipality.

Title Defects | What Are Recording Errors?

To kick off our series on title defects, we thought we’d start with recording errors — one of the most common types of title problems that we see. Recording errors are clerical mistakes or omissions on deed-related documents that have been filed in public records. While human error is a part of life, these title concerns can have a significant impact on your ownership rights surrounding your property unless they’re resolved.

What is a deed?

Before elaborating further on recording errors, we should explain what a deed actually is. A deed is an important legal document that spells out who maintains title (ownership) rights regarding the utilization of and access to a real estate parcel. When a property is conveyed from one party to the next, such as during a real estate transaction, the deed serves as legal proof of these ownership rights. 

What types of recording errors might occur?

Errors in public records can be varied and can really impact any aspect of the deed-transfer process. Some of the most common recording mistakes we see include:

-Spelling errors (such as in names or street addresses)

-Incomplete or incorrect legal description of the property

-Missing information (such as a spouse’s name)

-Missing signatures

-Improper filing of the documents

-Incorrect marital status

How are recording errors corrected?

Recording errors are generally detected when a title agent or attorney performs a title search on a property during the real estate settlement process. If this type of title defect is identified, steps may be taken to correct the error, which might include filing a new deed (a warranty deed or quitclaim deed), filing a corrective deed or corrective affidavit, or completing and submitting other legal documents to have the omission or error fixed. The form of documentation required will depend upon the type of error, the state in which the property is located, and other considerations. In certain cases, no action may be required to correct a recording error. A title agent or attorney can help to identify what approach should be taken for recording error resolution.

If you have questions about recording errors or other title defects, please contact the professionals at Linear Title & Escrow in Virginia Beach, VA.

Understanding Title Defects

Over the next few months, we’ll be breaking down some of the most common title defects, providing insight into the types of issues that can arise and how these conditions may be resolved. Before we dive into our upcoming series, let’s take a moment to review the basics of title defects.

What are title defects?

Title defects are irregularities in the ownership history of a piece of real estate that may prevent the free, clear, and proper transfer or sale of a property to another party.

Why should I be concerned with title defects?

Title defects can interfere with your ability to take full and proper ownership of a property. If title defects are discovered after closing (also referred to as settlement), another party may have some ownership stake in your property.

What does “clouds on title” mean?

Clouds on title is another term referencing discrepancies associated with the chain of ownership on a given property.

How are title defects identified?

In most cases, title defects are identified through a title search. There are instances, however, when evidence of a title defect will arise after settlement has occurred.  

What is a title search?

A title search is a thorough investigation of the ownership history of a property. It is accomplished by reviewing legal documents recorded with the clerk of courts in the municipality in which the property is located.

Who conducts a title search?

Title searches are generally performed by a title agent or an attorney.

What happens when a title defect is found?

When a title defect is discovered during a title search, the title agent or attorney will take steps to have it resolved. The method of resolution, however, will vary according to the type of title defect that has been identified. While some title defects, like recording errors, are resolved by submitting corrective documentation, others may involve court proceedings and additional processes.

How can I protect my property against title defects?

Owner’s title insurance is a type of indemnity insurance policy that can help to protect home buyers against financial loss should another party successfully claim an ownership stake in their property. 

 For more on title defects, contact the team at Linear Title & Escrow today!

What Is the Difference Between Title and Escrow?

If you’re going through the steps to buy a home, you’ve likely heard the terms “title” and “escrow” at some point during the process. Title and escrow are two very important components central to most real estate transactions. Whether you’re a first-time homebuyer or have several purchases under your belt, it’s a good idea to know what these terms actually mean. Read on to learn more about title and escrow and how they might apply to the settlement proceedings surrounding the property you intend to purchase. 

What is title?

Title is the legal term describing the past and present ownership of a piece of real estate and the right of said owner to use the land/property. When one party sells a property to another, the title and the deed (or document describing these ownership rights) are passed on to the buyer. Title transfer and deed preparation activities are generally conducted by a title agent or real estate attorney.

Title search: Identifying title defects

In order for title to pass seamlessly and legally from one party to the next, it must be free and clear of title defects, or issues that would prevent this transfer of ownership. Prior to transferring title, the physical act of which takes place at the real estate closing, the title agent will carry out a title search. To perform a title search, the agent will conduct a thorough evaluation of the history of ownership on the property via public records in an effort to identify any issues, or “defects,” that would prevent the proper transfer of property rights. In most cases, any title defects that are detected must be resolved in order to conclude the real estate sale. While there are a wide range of title defects, some of the most common include:

-Mechanic’s liens

-Judgments

-Unpaid taxes 

-Improperly probated wills

-Undisclosed heirs

-Recording errors

-Fraud or forgery

What is escrow?

Escrow describes the holding, management, and disbursement of the legal documents and funds central to a given real estate transaction. The escrow agent functions as a neutral third-party to facilitate the closing process, receiving and disbursing the funds and documents according to the conditions set forth in the real estate contract. Since most real estate purchases involve large sums of money, utilizing an escrow agent can ensure all parties are fairly represented (with respect to the collection and distribution of financial assets) and streamline the closing process.

How can I learn more?

At Linear Title and Escrow in Virginia Beach, VA, our experienced team serves as a trusted source for real estate closings and escrow services throughout the Hampton Roads area. To learn more about title, escrow, title search, or other aspects related to real estate settlements, please contact our office today!

How Are Buyer Closing Costs Calculated?

Buying a home is a big part of the American dream. Whether you’re a first-time home buyer or seasoned pro, sitting at the settlement table on closing day is a thrilling (and often life-changing) experience. If you’re going through the process of buying a home or even refinancing an existing mortgage, you’re likely wondering what your closing costs might be. It’s important to understand how settlement costs are calculated so you can have a solid idea of what to expect when it’s time to close on your home loan.

What Are Closing Costs?

Closing costs are the fees paid by the buyer and seller at the time of the real estate settlement. They’re a part of every formal real estate transaction, regardless of the type of purchase, mortgage product, or property. On average, buyer closing costs can range anywhere between 3 – 6% of the purchase price. However, they do vary according to several factors, including the amount of the loan, the type of loan, mortgage insurance, and taxes, among others.

Buyer Closing Cost: A General Overview

The total amount of closing costs is specific to each situation, buyer, and individual sale. When purchasing a new home or refinancing an existing mortgage, your overall settlement fees may include the following:

-Mortgage origination fee (typically 0.5% of the loan amount)

-Loan discount points (if applicable)

-Mortgage insurance

-Title search and recording fees

-Transfer taxes

-Lender’s title insurance

-Owner’s title insurance 

-Home appraisal fee

-Property taxes

-Homeowner’s insurance

-Boundary survey (if applicable)

-HOA fees (if applicable)

-Other administrative or settlement fees

Reviewing Closing Costs

It’s essential to review your closing costs carefully, whether you’re buying a home or refinancing your mortgage. You should receive a loan estimate from your lender about three days after submitting your mortgage application. This document typically includes all of the estimated expenses associated with closing your loan. A Closing Disclosure (CD) form should be provided to you three days prior to your closing date. The CD outlays your financial responsibilities in detail, from itemized closing expenses to monthly mortgage payment amounts. Any questions, concerns, or revisions to these details must be made before closing day.

Learn more about the closing process from the experts at Linear Title & Escrow!

Correcting Recording Errors

Title defects are problems that occur with the transfer of ownership of a property from one party to another. While these issues (also called clouds on title) may range from wills that have been probated incorrectly to boundary disputes, one of the most common title defects is recording errors on deeds. 

Even when proper protocols are strictly followed in the recording of deeds, there is always the chance for human error. Read on to learn about some of the most common types of recording errors and how these issues are often corrected.

Types of Recording Errors

Recording errors on deeds may occur in one of the following ways:

-Misspelling of a name

-Omission of information

-Incorrect legal description 

-Missing signature(s)

What Is the Correction Process?

When a recording error on a deed is detected, a title agent or attorney may take steps to have the deed corrected. This process will vary according to the type of error that has been identified, but may include one or more of the following actions:

-Submitting a new deed (quitclaim or Warrantor’s deed)

-Completing a corrective deed

-Filing a corrective affidavit

-Tendering other legal instruments to correct the error

Protecting Against Title Defects

Owner’s title insurance is a type of indemnity policy that helps protect a homeowner’s financial interest in a property should a title defect be identified at any point after closing. These plans may remunerate the homeowner should the property be lost to another party whose legal claim to the said property is valid. An owner’s title insurance policy can also help cover the cost of legal fees should the homeowner need to go to court to resolve the dispute. 

For more on correcting recording errors on deeds, contact the team at Linear Title & Escrow today!

Do I Need Owner’s Title Insurance?

Buying a home is one of the biggest financial investments many Americans make. While homeowner’s insurance can help protect a home against monetary loss due to physical damage, title insurance serves to mitigate risks resulting from title problems (referred to as “title defects”). A title defect is any factor that clouds the evidence surrounding true ownership of a property, or one that allows another party to claim some ownership stake in your real estate investment. An owner’s title insurance policy can help assuage this risk, and help protect you from financial loss surrounding your home. 

What Is Owner’s Title Insurance?

An owner’s title insurance policy is a one-time premium paid at closing. It is an indemnity insurance plan that protects the homeowner in the event another party has a valid claim to some form of ownership in their property. While most lender’s require homeowners to purchase a lender’s title insurance policy (in the event the mortgage becomes unenforceable), an owner’s policy is not mandatory. It is, however, highly recommended to help protect your home against title defects that were not discovered during the title search conducted prior to closing. There are two types of owner’s title insurance policies, known as standard and enhanced. Talking with an experienced title agent can help you determine which of these options might be right for your needs.

Key Benefits of Owner’s Title Insurance

Owner’s title insurance offers a number of benefits to you as a homeowner. It can help cover legal costs to defend your property rights in a court of law or remunerate you if the property is lost to a valid ownership claim. Owner’s title insurance can help protect your property and your real estate investment against a number of unforeseen title issues, some of which include:

-Fraud or forgeries

-Unknown heirs

-Recording errors

-Liens or judgments

-Boundary disputes

-Restrictive covenants

-False impersonation

-Improperly probated wills

-Easements or other encumbrances

For more on title insurance, please contact the experienced team at Linear Title & Escrow!

Glossary of Mortgage Terms

With mortgage rates still hovering around record lows, many people are looking to purchase a new home or refinance their existing home loan. Our last post highlighted some of the most common title terms to know. We think it’s only fitting to help new and seasoned home buyers and sellers better understand terminology central to the mortgage process. 

Common Mortgage Terms to Know

-Pre-qualification: The process of gaining a tentative estimation of the amount of home loan you can afford based on general financial information you provide.

-Pre-approval: The process of being approved by a mortgage lender to borrow up to a specific amount. 

-Home Appraisal: Completed by a third-party professional to determine the fair market value of a home. A home appraisal also impacts the amount of money a lender will let you borrow.

-Loan Origination: The all-encompassing phases of the home loan process carried out by the lender, from the mortgage application to the relinquishment of funds.

-Loan Discount Points: Enable a home buyer to pre-pay mortgage interest to secure a lower interest rate for a loan. Every point paid down is equal to one percent of the total mortgage amount. 

-Private Mortgage Insurance (PMI): A form of insurance typically associated with conventional home loans. PMI is generally obtained in cases where a borrower’s down payment is less than than 20 percent of the home’s value, and remains effectual until the LTV (loan-to-value ratio) is less than 80 percent.  

-Amortization Schedule: Outlines the series of mortgage payments that are scheduled to take place over the life of a loan.

-Closing: Conclusion of the real estate transaction. Closing, also referred to as “settlement,” occurs when all documents relating to the mortgage are signed and completed, and the transfer of title (property ownership) from the seller to the buyer takes place.

-Closing costs: Fees rendered by both buyers and sellers during settlement at the close of the mortgage process.

-Fixed-rate mortgage: Financial instrument for which the interest rate remains constant (fixed) over the life of the loan (generally 15 or 30 years). 

-Adjustable-rate mortgage (ARM): Mortgage for which the associated interest rate varies according to current market conditions, resulting in an increase or decrease in loan payments on a periodic basis.

-Closing Disclosure (CD) Form: Document outlaying details of the mortgage, from detailed payment information to closing costs.

For more on mortgage terms and how they may relate to the settlement process, please contact the experienced team at Linear Title & Escrow today!

Glossary of Title Terms

The term “title,” as it relates to real estate, describes ownership associated with a given piece of property. When a person buys a home, he/she assumes “title” of the property, which is conveyed during a settlement proceeding know as “closing.” 

Though the home closing process can seem rather complex at times, knowing common title terms can help you gain a clearer understanding of your rights as a property owner. We’ve put together a list of some of the more common title terms you’re likely to hear as you navigate your way through settlement proceedings.

Title-Related Terminology

-Deed: A real estate document that legally transfers ownership (title) of a property from one party to another. 

-Closing/Settlement: The formal process of finalizing the transfer of ownership rights to real property from one party to another.

-Title Search: The due diligence process of reviewing the historical chain of ownership surrounding a given property to search for and identify any title defects.

-Title Defects (Clouds on Title): Existing liens, judgments, or other legal impediments that could render title unmarketable and prevent a homebuyer from taking full legal possession of a property in a real estate transaction.

-Clear Title/Clear-to-Close: The notification to move forward with settlement, signifying a title searched that revealed no clouds on title. This also indicates that any title defects identified during title search have been resolved and ownership can legally transfer from the home seller to the buyer, free and clear.

-Title Agent: The professional conducting the title search and home closing process.

-CD Form (Closing Disclosure Form): A document integral to mortgage settlement proceedings that details closing costs, loan information, and the overall financial responsibility of the buyer.

-Title Insurance: A type of indemnity insurance plan that protects the homeowner’s property rights (Owner’s policy) or the mortgage company’s financial interest (Lender’s policy) against loss in the event title defects are discovered after closing. 

-Escrow: A financial account established by a neutral third-party that holds, manages, and transfers real estate funds and documentation during the settlement process. 

-Closing Costs: Funds paid by the home sellers and buyers at settlement to conclude the real estate transaction. 

For more on title services and real estate closings, contact Linear Title & Escrow Today!

What Are Title Defects?

Along with facilitating the real estate closing process, one of the central roles of a title company is to run a search for title defects surrounding a property. A title defect, also referred to as cloud on title, is any factor that interferes with or prevents the proper transferal of property ownership from one party to another. Title defects may occur in various forms and generally impede the closing proceedings until resolved. To identify such irregularities, a title search is carried out by a settlement professional prior to closing. Read on to learn about some of the most common title issues and how resolution might occur to allow the real estate closing process to move forward.

Common Title Defects

Title defects can encompass a wide range of factors. However, some of the most common include:

-Liens

-Judgments

-Boundary disputes

-Unreleased deeds of trust

-Errors of omission/recording errors

-Forgery or fraudulent claims to property

-Missing or unknown heirs

-Incorrect probation of wills

-False claims of marital status

How Are Title Defects Resolved?

In order to close a loan on and take ownership of a property, the title must be rendered free and clear. The resolution approach for addressing defects identified during a title search depends on the type of cloud on title that has been identified. In some instances, such as recording errors, it is simply a matter of filing the correct information with the local government recording office. Other types of title defects, like mechanic’s liens, are absolved by financial means, or bringing a delinquent account up to date. Title defects may present more difficult circumstances, in some instances, and may require legal proceedings to resolve. An example of this type of defect might include undisclosed heirs or property/boundary disputes.

Safeguard Against Title Defects

While title defects are a blip in some real estate transactions, homeowners can help mitigate the risk of property or financial loss by purchasing Owner’s Title Insurance at the time of closing. This type of indemnity policy can remunerate the owner for certain costs associated with defending title or resolving title defects weeks, months, or even years after closing. 

For more information on title defects, title search, or the benefits of title insurance, contact the experienced team at Linear Title & Escrow.