Frequently Asked Questions
What is a title?
To put it simply, the title is the proof that the owner is the rightful owner to the property in question.
What is title insurance?
Title insurance protects against any property loss or damage they might experience. Title issues can include liens or defects in the title to the property. Each title insurance policy is different.
How does title insurance differ from other insurance?
Insurance such as car, life, or health protects against potential future events and is usually paid in monthly or annual premiums. A title insurance policy insures against events that occurred in the past of the real estate property and the people who owned it.
Another difference is in how the policies are paid for. Title insurance is purchased with a one-time premium and provides coverage for as long as the policyholder or their heirs own the property. This is unlike the annual or monthly premiums you must pay for other insurance types. Examples of such defects could be mechanic’s liens, HOA dues liens, child support liens, and other liens. You can view a list of many of the protections provided by title insurance here.
Over half of all real estate transactions have a problem somewhere in the chain of title. Mason County Title Company assists in taking corrective action to ensure the transaction goes smoothly.
Who needs title insurance?
Purchasers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller, and lender all benefit from issuance of title insurance.
How is a title insurance policy created?
After the escrow officer or lender opens the title order, the title agent (Mason County Title Company) opens a title order. A Preliminary Report is issued to the customer for review and approval. All closing documents are recorded upon escrow’s instruction. When recording has been confirmed, demands are paid, funds are disbursed, and the actual title insurance policy is created.
What types of insurance policies are there?
ALTA Owners Standard
Insures vesting of title, right of access to and from the land, and marketability of title, based upon the public records of Mason County, subject to the policy exclusions and title exceptions noted.
“Standard Exceptions” to title are items typically not disclosed in the public record. “Special Exceptions” are items of public record that, in the Title Company’s opinion, affect the title to the property under search, such as easements, covenants, reservations, and loan or other monetary items affecting the title.
This policy can be issued on commercial property, vacant land and residential dwellings.
ALTA Owners Extended
The Owners Extended Policy covers the same matters of public record covered by the Owners Standard Policy as well as certain unrecorded matters.
Upon the approval of the title company, several of the “Standard Exceptions” are deleted. To obtain approval, the title company will normally make physical inspection of the property. Often, a survey will be required before the title company will issue the Owners Extended Policy.
This policy is ordered primarily when the purchaser is concerned about the location of dwellings and/or easements on the property being purchased. There is a surcharge to the title premium, which is normally paid by the purchaser.
ALTA Homeowner’s Policy
The ALTA Homeowner’s Policy is a policy form which provides expanded coverages, in some respects similar to an Owners Extended Policy. However, this form is available only in connection with the sale of land improved by a 1 to 4 family residence, and is not available for purchasers other than individuals (and trusts).
No survey is generally required; however, this form of policy is generally only available for platted (including short plats) lots, or unplatted lots of 1 acre or less, though some title insurers issue on larger surveyed lots.
This form of policy is typically the default form of policy requested in Purchase and Sale agreements for residential property when real estate agent(s) are involved in preparing the agreement.
ALTA Loan Policy Standard
This policy insures a real estate lender for the same matters insured by the ALTA Owners Standard Policy. In addition, the enforceability and priority of the Mortgage/Deed of Trust are insured.
Schedule B includes the same “Standard Exceptions” and “Special Exceptions” as the ALTA Owners Standard Policy.
This policy is typically issued to lenders taking a secondary lien position or making loans to be held “in house”, or in connection with seller financed sales of real estate or other private party financing.
ALTA Loan Policy Extended
(often referred to as “Mortgagee’s ALTA”)
The Extended Loan Policy covers the same matters as the Standard Loan Policy, as well as certain unrecorded matters, insuring the lender. In addition, several endorsements to the policy are issued, providing the lender with additional coverage.
Upon approval of the title insurer, some or all of the “Standard Exceptions” are deleted from the policy. An affidavit from the property owner addressing possible issues is often required, and a property inspection may be made to discover potential encroachments or other adverse matters not of public record prior to title company approval (“ALTA clearance”).
This policy is typically ordered by lenders in the first lien position, or who sell their loans in the secondary market.
What is escrow?
Escrow refers to the process in which the funds of a transaction (such as the sale of a house) are held by a third party, often the title company or an attorney in the case of real estate, pending the fulfillment of the transaction.
How does escrow work?
The escrow process starts when a party to a real estate transaction (seller, seller’s agent, buyer or buyer’s agent) opens the escrow after a written sale agreement is reached. Upon opening, the escrow holder should be provided with the terms of the sale and the information necessary to carry out tasks. The escrow holder’s duties and the timing of key tasks vary between states.
While your real estate transaction is in escrow, your escrow officer and agent will work with you to make sure the right steps are taken at the right time. Tasks that the escrow holder may complete include:
- Coordinating communications between all parties in the transaction
- Preparing written escrow instructions
- Requesting a preliminary report or commitment
- Requesting a statement of identity (information) from the buyer or seller as needed
- Ordering demands or beneficiary statements
- Receiving bills from home warranty companies, as well as pest, roof, home and other inspection companies
- Preparing or securing the deed or other recordable documents
- Complying with lender’s requirements
- Prorating taxes, interest, insurance and rents
- Receiving purchase funds required for closing
- Coordinating recording of deeds and any other necessary documents
- Closing escrow when all the instructions of the buyer, seller and lender have been carried out
- Disbursing funds as authorized, including charges for title insurance, recording fees, real estate commissions and loan payoffs
- Preparing final statements for the parties, which account for the disposition of all funds deposited in escrow
When all instructions in escrow have been carried out to the satisfaction of each party, the escrow is ready to be closed. With closing, the title to the property is transferred to the buyer, the sales proceeds are paid over to the seller, necessary documents are recorded and title insurance is issued. It is important to note that the escrow holder does not offer legal advice, negotiate the transaction or offer investment advice.
Do I need escrow?
Escrow helps protect all parties in the sometimes-complicated process of real estate transactions. For example, let’s say you buy a house, and upon inspection, the house needs a new foundation. The seller agrees to fix the foundation. However, when you do the final walk through, the foundation hasn’t been touched. Since you’ve got escrow and that was part of the contract, the sellers won’t see a penny until they follow through on that deal.
Escrow helps protect everyone from issues that could arise during the closing. It can be very helpful during your transaction.
For more information, check out Stewart Title’s website.
You can also visit Old Republic Title‘s website for title and escrow information and resources.