About the Title to Your Condominium Home

“We’re Buying a Condominium!”

You hear this expression more and more as condominium ownership now covers almost every form or residential housing. Townhomes, duplexes, single-family detached homes and apartment buildings. The principles of condominium ownership apply equally to all.

When you buy a condominium unit, you acquire individual and absolute title to the particular space which your unit occupies. In addition, you own an undivided interest — collectively with all other unit owners in the condominium — in all the ‘common’ parts of the property, such as the land, main walls, roofs, halls, lobbies, stairways, and other parts of the condominium property used jointly by all owners.

Your ownership of your unit is as complete and absolute as ownership of a house and lot. You have title to your unit just as you would have title to a single-family home — with the same legal status and financial advantages that are held by the single-family house owner.

Further Advantages

  • You can obtain your own mortgage with freedom to arrange the size and down payment, terms, and prepayment privileges. As the mortgage is paid off, the accumulated equity belongs to you.
  • You are only liable for your own mortgage — not for any of your neighbors.
  • You receive an individual tax assessment and are liable solely for your own taxes.
  • You have the personal income tax advantage of home ownership — both real estate taxes and mortgage interest are tax-deductible.
  • Because each living unit is owned individually, your ownership interest or your share of the common elements cannot be affected by any misfortunes or legal actions, which may beset owners of the other units.
  • You may rent or sell your unit whenever you wish in accordance with the terms of the condominium agreement.

How Can I Own Space in a Building or a Development?

Think of the matter as having title to a cube of space. You are purchasing — acquiring title to — a unit “air lot,” in just the same manner as you can acquire a title to a peice of land on the earth’s surface.

The principle of such air rights has long been established by law and there have been numerous commercial buildings erected on air rights over railroad tracks or other property.

A condominium is simply a variation of the process whereby each of a number of persons owns a “unit air lot” and they all own, in common, the land and remaining portions of the property.

Can Title to My Unit Be Insured?

It not only can, but should be, in exactly the same way that titles are insured for owners of other types of property.

Each purchaser of real estate wants to be certain of a good title — a title that is free and clear of any cloud, or defect, or claim that might possible affect ownership, or cost money at some future time, or make it more difficult to dispose of the property when one wishes to do so.

The same considerations prevail concerning the title to your condominium unit. As the owner of a condominium unit, you are in the same situation as any other property owner.

Title insurance policies are an accepted form of protection for buyers of real estate, providing that the buyer is receiving good title. Such a policy insures the rights of an owner, and makes certain that the owner will be able to convey good title when the time comes to sell.

How do I Benefit from My Condominium Title Insurance?

A title insurance company generally works closely with the developers of condominiums and their legal counsel to resolve problems and set up the procedures necessary to make the safeguards of title insurance available to those entering into this form of real estate ownership.

A fundamental problem is that of precisely and accurately describing the location of each individual unit in space; that is to say, establishing the physical boundaries of the unit with the same type of legal description that exactly locates a piece of land and identifies it from all other pieces of land anywhere else on the face of the earth.

Your individual unit must be described by dividing, locating, and measuring it, in three-dimensional terms, so that it cannot possibly be confused with any other unit space, if you are to have good title. Only by doing so does it become possible for a condominium purchaser to be safe from involvement in the interests or obligations of owners of other units in the condominium and to acquire such an interest in your own property as will permit you to obtain a mortgage on it, and at a later time dispose of the unit through sale or by your will.

Your title insurance policy insures — guarantees to you — that your condominium declaration and the deed to your particular apartment, do, in fact, thus describe, locate and identify your unit to the exclusion of all other space on earth.

Further Protection Provided by Title Insurance

Your attorney will explain to you that the title to your unit — and the safety of all that you have invested in it — are dependant upon the soundness of the title to the parcel (or parcels) of land on which your condominium dwelling has been erected.

You and other co-owners are the most recent parties in a continuous “chain of title” going back through all of the owners, mortgage lenders, and other parties who have ever had some interest or rights in the land on which your condominium home stands.

Just as when a single-family house and lot is bought, the title to the dwelling, which you are buying, is only as good as the weakest link in that chain. Somewhere down through the years which this land stood vacant, or while it had other structures on it, there could have been a forgery, irregularities in a deed, or unsatisfied judgements against previous owners. And you’ve heard of missing heirs, or persons declared legally dead, turning up at long last to claim their rightful share in property — with dire consequences to those who may have subsequently purchased it.

These are called “hidden risks” when real estate is purchased. There are others, and most cannot be discovered by an examination of the public records. You have no practical ways of learning about these hidden risks or weaknesses in the title to the land beneath your condominium home — and hence, weaknesses to the title to your unit. Laws that govern ownership of all real estate may protect such unsatisfied claims even if they are generations old.

These are some of the reasons why the developers of your condominium dwelling may have arranged for each unit buyer to have the protection of a title insurance policy. It is the best assurance you can have that you are receiving good title. It is exactly the same kind of title protection used in the sale and financing of many real estate developments — from small cottages to multi-million dollar commercial and industrial complexes.

(Note: The information in this article is intended to be general in nature. Plan to discuss your particular circumstances with an attorney for how this might apply to you.)

What Every Home Seller and Buyer Should Know About Title Insurance

Most home sellers and buyers have been informed that obtaining title insurance will provide them necessary protection over possible title defects; but many remain uncertain why this is so — or even about what title insurance is.

Why the Seller Needs to Provide Title Insurance

Any prospective buyer will need evidence that his investment in your property is free of title defects. In fact, your contract of sale probably requires it. The title insurance policy that you provide the buyer is a guarantee that you are selling a clear title to your real estate unencumbered by any legal attachments that might limit or jeopardize ownership. Title insurance reassures your buyer that the title has passed careful scrutiny. In addition, it can help your deal close more quickly and easily.

Why the Buyer Needs Title Insurance

Without a title insurance policy, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records, or mistakes in the examination of the title of your new property. As a result, you may be held fully accountable for any prior liens, judgements, or claims brought against your new property.

(Note: The information in this article is intended to be general in nature. Plan to discuss your particular circumstances with an attorney for how this might apply to you.)

What’s in a Title Search?

A Step-By-Step Review of Title Searches

You’ve decided to purchase a home and hope to take possession as soon as possible. The terms have been agreed upon and all the financial arrangements have been made. But there’s one important detail remaining. Before the transaction can close, a title search must be made.

The most accurate description of title is a bundle of rights in real property. A title who owns them.

A title search is a means of determining that the person who is selling the property search is the process of determining from the public record just what these rights are and really has the right to sell it, and that the buyer is getting all the rights to the property (title) that he or she is paying for.

The search process can be undertaken by the title company in those jurisdictions where the company maintains offices. In some areas, however, searches are made only by practicing attorneys. However the search is performed, in most real estate transactions today, a title insurance policy is purchased to insure the buyer that he or she has purchased a valid title.

In those transactions where title insurance is involved, the title company must determine insurability of the title as part of the search process. This leads to the issuance of a title policy, which insures the existence or non-existence of rights to the property.

The title insurance company will, at its own expense, defend the title and pay losses within the coverage of the policy if they occur.

But what, exactly, is involved in a title search? Here is a step-by-step review:

Chain of Title

This is simply the history of the ownership of a particular piece of property, telling who bought it and sold it, and when. The information may be derived from public records – usually a county clerk’s or recorder’s office – or obtained from title plants privately owned and maintained by title companies. There are great varieties of such plants – index cards, punch cards, tract books, even sophisticated computerized plants. However, they all contain essentially the same information from which the history of the title may be secured.

Tax Search

This is a search to determine the present status of general real estate taxes against the property. The tax search will reveal if taxes are current or weather any taxes are past due and unpaid from previous years. In addition, the tax search will indicate the existence of any special assessments against the land and, if so, weather or not these assessments are current or past due.

A due and unpaid tax or special assessment is a prior lien or claim on the property above all others. If a buyer purchases property with unpaid and past due taxes or assessments against it, he or she is likely to find a government body – the village, county or state – placing the property up for sale to pay those taxes or assessments. A tax search reveals the status of the taxes. Title insurance protects the buyer against loss from unpaid and past due taxes and assessments.

Report On Possession

Many title insurance companies send inspectors to look at the property to look at the lot size, check the location of improvements, look for evidence of easements that are not shown on record, and check on who is living there.

The purpose of this is to supplement the information learned from the title search. In the eyes of the law, any buyer of real estate is assumed to have notice of all matters properly shown in the public records as to that real estate as well as any information that an actual inspection may reveal.

If the inspector detects an unrecorded easement or other evidence of outstanding rights that could affect the owner’s title and possibly the value and intended use, the company tells the buyer of these things before he closes his purchase. Those matters must then be either disposed of or shown as exceptions in the title insurance policy. Sometimes when an acceptable survey and appropriate affidavits are received, an inspection will not be made.

Judgement and Name Search

One of the most important parts of the title search is to determine if there are any unsatisfied judgements against the seller or previous owners which were in existence while they owned the title. A judgement is a general lien against the debtor’s real estate and constitutes security for any money owed under the judgement. The real estate can be sold to satisfy the judgement.

For example, the name Smith might be spelled Schmidt, Schmid, Schmidtt, Schmidz, Schmied, Schmiedt, Smid, Smyhthe, and so on. The name Nichols can be spelled 73 different ways, from Nachols to Nychals. The task is to determine which of these applies to the owner in question. First names have to be checked, too. There are 25 foreign forms of John, including Johann, Jehan, Hans, Shaun, Gudi, and Efom.

Rights established by judgement decrees, unpaid federal income taxes, and mechanics’ liens all may be prior claims on the property, ahead of the buyer’s or lender’s rights. If a judgement is discovered that constitutes a defect in the title, it is pointed out, and the seller must then eliminate it before the title of the new buyer can be insured free and clear of that judgement.

Commitment

When these searches have been completed, the title company issues a commitment to insure, stating the conditions under which it will insure the title. The buyer and the seller and the mortgage lender can proceed with the closing of the transaction after clearing up any defects in the title which may have been uncovered by the search and examination.

The mortgage lender is as concerned about the quality of the title as the buyer because the property is to be security for the new mortgage loan. The mortgage lender requires assurance that it has a valid first (or another acceptable priority) mortgage lien on the property. This is not only common sense, but generally is a legal requirement of regulated mortgage lenders.

The lender’s title insurance, however, doesn’t protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the lender are very different. The provisions of a lender’s title insurance policy are very different from those of a buyer’s policy, so the buyer should obtain his own policy, often issued simultaneously with the lender’s policy.

(Note: The information in this article is intended to be general in nature. Plan to discuss your particular circumstances with an attorney for how this might apply to you.)

Why Title Insurance is Needed When Refinancing a Mortgage Loan

Today’s lower interest rates have spurred you to refinance your mortgage. Now you can expect to reap the benefits of substantially reduced monthly mortgage payments, but you can also expect to pay the lender the typical closing costs associated with any mortgage loan.

Why? Because from the lender’s standpoint, a refinanced loan is no different than any other mortgage loan. So be prepared for service fees or points and other expenses — including a new charge for title insurance.

Title Insurance is Important When Refinancing

Why do you need to buy title insurance again even though you purchased a policy when you first bought your home and there is no change in ownership?

It’s because a separate policy is needed by the lender insuring the validity of your mortgage when it is made.

For as long as you own the property your mortgage is valid, but it doesn’t insure the new mortgage created when you refinance, and it doesn’t provide protection against events that may have transpired between the time you purchased the property and when it is refinanced.

For example, you may have taken out a second mortgage on the home that could threaten the priority of the new lender’s mortgage. Or, there could be legal judgements against you or a mechanic’s lien against the property by a supplier who wasn’t paid for home improvements.

Lenders also insist on a new title policy because many mortgages are packaged as securities and sold to investors in the secondary mortgage market. Title insurance is the only practical way to provide the assurance that investors demand and ensure that the mortgages backing these securities are valid and enforceable.

For your refinance transaction with some title insurance companies, you may qualify for a special title insurance rate based on the loan amount. There may be additional charges for recording fees, closing fees, and endorsements. Your lender can provide you with an estimate of these costs.

How to Prepare for Your Refinance Closing

Once you have made the decision to refinance your home, you’ll want your transaction to progress as smoothly and efficiently as possible. In an effort to avoid potential problems and delays, consider the following points. Check with your real estate agent to determine which ones apply to you.

  • Bring a Cashier’s or Certified check to the closing for the amounts you must pay, not a personal check.
  • Bring an original Homeowners Insurance Policy to the closing along with a paid receipt for the first year’s premium. If you’re refinancing a condo, bring a Certificate of Insurance instead. A Certificate of Insurance can be obtained from your condo association or property management company.
  • Before the closing, contact your lender regarding any additional requirements that must be satisfied prior to closing.
  • Bring personal identification that includes your picture and signature to the closing.
  • If you have an existing mortgage(s), a current pay off letter(s) must be presented at closing. Contact your lender for instructions on how to obtain a current pay off statement(s).
  • If you are going to be paying off credit card balances at the closing, the most current statements must be brought to the closing.
  • If your property is a condo, bring an assessment letter from your condo association or property management company to the closing.
  • If your transaction requires a Notice of Right to Cancel, disbursement may be delayed until the fourth day following the day of the closing.

(Note: The information in this article is intended to be general in nature. Plan to discuss your particular circumstances with an attorney for how this might apply to you.)