June 2004 "Buying and Selling Your Home - Part 1"
PLANNING FOR WEALTH AND SECURITY
By Attorneys Jennifer and Jeff Hawkins
BUYING AND SELLING YOUR HOME – PART 1
The old saying that “a man’s house is his castle” is proven by personal financial statements. Many people invest more money in their homes than all of their other assets combined. Unfortunately, too few people spend the time and additional money necessary to protect their investments adequately. The real estate business has changed in recent years and many home buyers and home owners are being led to financial slaughter in real estate transactions. You can protect your investment with some courage and a lot of caution.
TITLE INSURANCE: MOVE OVER ABSTRACT
If you bought a house more than 10 or 15 years ago, you probably received a flip top book that contained summaries of the property’s ownership changes from the earliest Indiana history. An abstractor searched the real estate records at the courthouse and added new pages to the abstract with summaries of any mortgages, deeds, judgments, or other matters that would affect the real estate ownership. A lawyer read the abstract and wrote a title opinion letter disclosing ownership problems and suggesting corrections. After the seller fixed the title problems delivered the deed to the buyer, the title company searched the real estate records and updated the abstract again, and the attorney wrote an updated final opinion to confirm that the buyer has purchased the real estate without serious title defects. Smart buyers always ordered abstract recertifications after buying their property and secured final title opinions to be assured that no mortgages, judgment liens, or other title defects would threaten the buyer’s home ownership.
Title insurance works much like the old abstract system. A title company still searches the real estate records and identifies title problems. However, instead of adding new pages to an abstract, the title insurance company issues a “commitment” that expresses the insurance company’s promise to insure marketable title (essentially, good title). The commitment identifies title defects that should be fixed before the buyer pays for the real estate. The real estate closing agent collects the title insurance premium from the seller or buyer at the real estate closing and the title insurance company updates the title search and issues a title insurance policy to the buyer.
An example of the policy’s usefulness may clarify how title insurance works. Imagine that a title searcher stayed up too late one night and was too sleepy to notice the seller’s $50,000 mortgage against the real estate while searching the mortgage records. The title insurance company would pay off the mortgage for the buyer and protect the buyer from the old bank’s mortgage lien. The old abstract system would have required the buyer to deal directly with the local abstract company instead of filing an insurance claim.
A new home buyer should store the title insurance commitment in a safe place until the final policy is issued. Generally speaking, a title insurance company should issue a final title insurance policy within a few months after the real estate closing. A home buyer should be alert and stay in contact with the local title insurance company about acquiring the title insurance policy. No title insurance policy should be issued later one year after the real estate closing.
THIS ARTICLE IS NOT LEGAL ADVICE. ALWAYS CONSULT AN ATTORNEY DIRECTLY BEFORE RELYING UPON THIS ARTICLE OR CHANGING AN ESTATE PLAN.
© 2004 by HAWKINS LAW PC, Estate, Trust & Business Attorneys. All rights reserved.