To help clarify the process of title and escrow we have outlined the important topics you should know.
Shopping For Title and Escrow Services
Consumers are free to shop for title insurance and to select a title and escrow company, to conduct their closing. Many consumers rely on their real estate agent or lender for a recommendation for a title company since they are in a position to know which companies provide good service. We are consistently ranked number 1 in market share and strive for excellent customer satisfaction. Because the closing process involves so many parts we believe it is important that you choose Escrow Officers and Title Officers with proven experience and reputations. If you decide to shop your own title company, we encourage you read our testimonials.
Because real estate is one of our most valued passions and so highly regarded, special laws have been created to protect ownership of the land and buildings erected thereon. Pacific Northwest Title examines the history of the property and issues title insurance to protect buyers and sellers of real estate, and mortgage lenders, against discrepancies or defects in ownership rights to the property. In Washington, home sellers customarily purchase “owner’s coverage” for their buyers, and buyers purchase “lender’s coverage” for their lenders. A title search can disclose (read more)
How Title Insurance Premiums are Regulated
Unlike most other kinds of insurance, title insurance protects against risks arising from past events rather than future events. Premiums include the costs of title searches, overhead, claims and profit. In Washington State, title insurers are regulated by the Insurance Commissioner, and under state law, insurers and agents must be licensed and maintain title plants, and may not sell any other type of insurance. Insurers must file their rates with the Insurance Commissioner, the Commissioner may order rates modified if he finds them “excessive, inadequate, or unfairly discriminatory,” but has no authority to approve or disapprove particular rate filings.
How does title insurance differ from other types of insurance?
Title Insurance is unlike auto, life or health insurance. Title insurance protects against risks arising from past events rather than future events. One time premiums are paid when consumers buy, sell, or refinance their property rather than monthly premiums paid for auto, life or health insurance.
How long does my coverage last?
Title insurance lasts as long as the insured has an interest or liability (based on warranties created under the seller’s conveyance) in the property. For the buyer, the coverage last as long as the buyer or his/her heirs (as defined in the title policy) own the property. For the lender, the policy is in effect until the lien of the loan is either paid in full or released from the property.
In Washington, the Homeowner’s Policy of Title Insurance is customarily issued for only the sale of a 1-4 Single Family Residences/Condominiums This product is a plain language policy, which is the default policy in the MLS purchase and sale agreement, and is an evolution of title polices for the consumer. Coverage ranging from defects in the record chain of title to certain zoning and encroachment issues and future occurrences. This policy is subject to maximum dollar limits of liability described in Schedule A therein. Read more on the terms, conditions and stipulations of the Homeowner’s Policy of Title Insurance.
Alternatively, the 2006 ALTA Owner’s Policy, issued in the sale of a real estate transaction, has evolved from an industry standard policy for more than 40 years and can be issued on any type of real property. It can be issued on commercial property, vacant land, residential dwellings and leasehold estates. The 2006 ALTA Owner’s Policy covers only those matters of public record insuring the purchaser and/or owner only. his policy is a solid, and proven policy recognized and widely interpreted the same by owner’s, title companies and attorneys alike. Read more on the terms, conditions and stipulations of the 2006 ALTA Owner’s Policy
Buying a house is an exciting time and the more you know about the process, the more relaxed you'll be. The team work of the closing process is essential. Beginning with professional agents that represent you to sell your home to the mortgage professional that will navigate you through the lending process. Escrow can be compared to the composer that conducts all the parties, from a neutral position, by gathering all the elements of closing such as: the purchase and sale agreement, lender instructions, seller instructions, buyer instructions and other claimants on the property and from these instructions your escrow officer then prepares the settlement statement and other closing documents and proceeds to closing. We'll walk you through what the closing process really means. (read more)
How to Read a HUD Settlement Statement
Today, as a consumer, closing your home and understanding the costs associated will be a lot easier. As of January 2010 regulatory changes in the HUD-1 settlement form on behalf of consumers needs, have created a level of transparency in the settlements statements for you to better understand closing costs. All cost through escrow, must be detailed on your HUD-1 settlement statement as fees associated with the services rendered. Costs for services shown on the HUD-1 settlement statement are laid out in a manner required by HUD. Here you will find a guide to the HUD-1 settlement form.
Section 100 to 303 Summary of the Borrower’s Transaction
For the buyer, this is the area that you will see information related to the “contracted” sales price, including concessions from the seller in the form of pro-rated taxes, assessments or credits for purchasing. Also, in this area you will find information related to your earnest money. At the bottom on lines 300, 301 and 302 you will find the total settlement to the buyer/borrower, taking the sum of the sales price, earnest money, seller credits and buyer/borrower debits to equal what is expected of the buyer/borrower at closing.
Section 400 to 602 Summary of the Seller’s Transaction
For the seller, this is the area you will see information related to the “contracted” sale price and deductions for taxes, assessments, credits to the purchaser for closing and other underlying mortgages/liens to be paid at closing. At the bottom on lines 600, 601, and 602 is where you will find the total settlement to the seller.
Section 700 to 704 Total Real Estate Broker Commission/Fees
If you use a real estate agent to help you in selling or buying a home, the cost of the agent's services is determined at the listing appointment in terms of commission paid to the real estate agent at the close of the transaction. Commission is customarily paid by the seller and deducted from the seller’s costs in Section 700.
Section 800 Items Payable in Connection with Loan
If the buyer is working with a lender for a loan necessary to purchase their home, fees associated with obtaining the loan will be listed in section 800. These include fees paid directly to the lender or the loan originator (mortgage brokers). Typical fees you will see here are: Loan Origination Fee, Loan Discount (Sometimes referred to as "points"), Appraisal Fees, Credit Report Fees, Tax Registration Fee, Flood Determination Fees and/ or Mortgage Insurance (PMI)
Section 900 Items Required by the Lender to be paid in advance
The Lender usually requires that the buyer/borrower pay certain items in advance at closing. These items may include:
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Daily Interest Charges – Interest charges from the date of closing to the 1st day of the following month.
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Homeowner’s Insurance Premium – The insurance premium for the first year will be collected at closing and paid to the insurance company for hazard insurance coverage for losses from fire, windstorms and natural hazards.
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Flood Insurance Premium - Depending on the location of your home, flood insurance may be required and payment of the first year's premium paid in advance at closing.
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Mortgage Insurance Premium (PMI) - The first year's mortgage insurance premium, or a lump sum premium for the life of the loan. This fee may be collected and paid to a private mortgage insurance company or to the government if it is an insured (FHA) or guaranteed loan.
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VA Funding Fee - The funding fee for a VA loan would be charged in this section.
Section 1000 Escrows/Impounds/Reserves
This section sets out the amounts needed to be paid at closing to establish accounts to pay future taxes and insurance premiums. Your loan program may require that reserve accounts be set up or you may have indicated to your Lender that you want to set up these accounts. These accounts need to be fully funded prior to the next payment date for taxes and insurance. The number of months collected at closing is determined by the payment dates of the next installments due for taxes and insurance.
Section 1100 Title and Closing Charges
This section shows the cost and fees for a preliminary title search and final title policies. Also included are the charges for the escrow services, notary services and/or attorney fees.
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Escrow Fee –The fee charged by the escrow agent who prepares closing documents and settlement statements. The fee is usually split between buyer and seller unless the loan program requires it be paid differently.
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Document Preparation – There may be a fee charged for the preparation of additional documents such as Quit Claim Deeds, Subordination Agreements or other documents required to clear title prior to closing.
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Title Insurance - Two types of title insurance policies may be required: Owner's policy and Loan policy. The charge for the Owner’s policy is determined by the sales price of the property. The charge for the Loan policy is determined by the amount of the loan. The Owner’s policy charge is usually paid by the seller and the Loan policy charge is usually paid by the buyer.
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Notary Fee – Signatures on some of the legal documents may need to be notarized. Notaries may charge a fee for this service.
Section 1200 Recording/Government Filing Fees
As part of the closing process the escrow agent will record certain legal documents such as the Deed and Deed of Trust at the county courthouse. The recording of the documents makes the transaction a matter of public record.
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Recording Fees - The local recording office charges a fee to enter the documents into the official record. These recording fees will show in the 1200 section.
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Excise Tax – Washington State imposes a tax at the time the legal documents are recorded. Currently the tax rate is 1.78% of the sales price of the property. This tax is usually paid by the seller and is shown as a charge in section 1200.
Section 1300 Other, Miscellaneous Charges
Survey Fee – Charges for a surveyor to survey the property to determine the size and boundaries as well as any encroachment on the property show on line 1302 of this section. Surveys are also used to determine if there are any violations of county or city setback requirements.
Inspection Fees – Charges for any type of inspection report performed at the request of the buyer or the lender will show in this section. Although these inspections are performed prior to closing most are paid at the time of closing. Common types of inspections requested are:
Pest Inspection Well/Water Inspection
Mechanical Inspection Roof Inspection
Home Inspection Lead Paint Inspection
Section 1400 Total Settlement Charges
Line 1400 is a total of the charges listed for the buyer/borrower and seller on page 2 of the HUD-1 Settlement Statement. These totals are carried to the first page of the HUD-1 Settlement Statement and shown on line 103 for the buyer/borrower and line 502 for the Seller.
Escrow officers act as impartial liaisons between all the parties of the transaction to carry out your written instructions. They are knowledgeable, professional, dedicated, to the closing process. Your escrow officer works hand in hand with their assistants to over see and coordinate the entire escrow process. (read more)
Title Officers act as liaisons between the title company and its clients. They assist customers by answering questions on how to clear a specific defect on a title, and helping explore options available to perfect the title. (read more)
