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Congratulations on beginning the process to home ownership! The closing process may seem baffling if you don't deal with it on a regular basis, but your real estate agent will be by your side to monitor progress and ensure each entity is completing the necessary steps. Your agent will likely be the one to help connect you to all the various entities involved in the process as well.
Your real estate agent can recommend several different title companies to assist you with the closing on your new home. Each title company's fees can vary from company to company, so it is important that you review these fees prior to hiring your title company.
The title company will pull a Preliminary Title Report that contains vital information, which may affect the willingness and the ability of the parties to close an escrow. The information includes ownership of the subject property, the manner in which the current owners hold title, matters of record which specifically affect the subject property or the owners of the property, as well as a legal description of the property and an informational plat map.
The Preliminary Title Report indicates the type of title insurance to be offered by the title company, and the exclusions, exceptions from coverage based on the type of title insurance policy the company intends to issue. Exclusions and exceptions can include items such as: recorded deeds of trust, easements, agreements, covenants, conditions, and restrictions. The Preliminary Title Report provides you with an opportunity to review any impediments that would prevent a clear title from passing to you.
When reviewing a Preliminary Title Report, it is important to check the extent of the ownership rights or interest you will be acquiring. The most common form of ownership interest is 'fee simple' or 'fee', which is also the highest form of interest an owner can have in real estate. Liens, restrictions, and interests of others will be listed numerically as exceptions in the report.
You may also have to consider interests of third parties, such as easements granted by prior owners, which limit use of the property. Some buyers attempt to clear these unwanted items prior to purchase. A list of standard exceptions and exclusions not covered by the title insurance policy is also attached. This section includes items the buyer may want to investigate further, such as laws governing building and zoning.
Your title company will open escrow on your behalf, or the two of you may do it together. This is when you enter into an agreement with a third party, usually the title company, which then holds funds, titles, and deeds until the sales transaction is complete. The title agency also performs other tasks, like verifying the property can be sold.
Between the time you finalized your offer and closing, the home inspector will visit the property to relay their findings. The loan agency will likely send out an appraiser as well, and sometimes an FHA inspection is warranted or necessary. Other inspections that can occur on a property are city inspections, often known as time-of-sale or truth-in-housing inspections. It is important to note that these inspections are for building code and hazards only. They are not as in-depth as a private buyer's inspection.
Although the title agency will likely handle title insurance, your lender may also require you to obtain homeowner's or other policies before providing you with a loan. Some jurisdictions mandate specific types of insurance are held as well, and your real estate agent can identify which ones you'll need.
Issuing a title insurance policy is an extensive and exacting process. The title insurance company will work to eliminate risks by performing a painstaking search of the public records. They search for where public records, laws, and court decisions pertaining to the property and the parties to the escrow are maintained. This is done to determine the current recorded ownership, recorded liens or encumbrances, and other matters of record, which could affect the title to the property. Once a title search is complete, the title company issues a Preliminary Title Report detailing the current status of title.
Sometimes law mandates that contingencies of the sale are released in writing, but it's commonly done as a formality regardless. You'll also have to place the funds needed to purchase the home into the escrow account, and the agency will then release the money to the seller after the documents are complete.
At long last, the home is nearly yours. You'll need to sign documents that say you're receiving the property and that you accept responsibility for the payments. You'll likely receive the title, though some lenders opt to hold onto it. In the background, the title company will file the necessary documents with the proper governmental agencies, like the register of deeds. Once everything is finalized, you'll still need to wait until the agreed-upon occupancy date to enter the home. During this time, you can pack, prepare for the move, and set up services like power, water, and Internet. Although your real estate agent will be with you every step of the way, you can always call them if you have questions or need help; before, during, and after the sale.