GT Title - Real Estate Basics

By: Gt Title  09-12-2011
Keywords: Real Estate, Insurance, Insurance Policies


Real Estate

Buying or selling real estate may be the largest single investment - and one of the greatest satisfactions - of your lifetime. Along with a substantial financial commitment, such transactions usually involve risks, technicalities and legal considerations. GT Title Services provides valuable assistance and assurances to intervals purchasing or selling real estate. Through its licensed real estate attorneys, title officers and escrow officers, GT Title provides cost-effective, professional-quality real estate transaction services. GT Title is able to provide clients COMPLETE assurance in their real estate transactions by providing the important combination of legal advice (through its attorneys) along with title insurance policies and escrow/closing services.

Starting the Process

Before signing any document or paying any money, you should carefully examine your requirements, resources and needs for professional help. An experienced, reputable real-estate broker may be indispensable. When you buy or sell real estate you may also come into contact with bankers or other lenders, title and mortgage officers, inspectors, or other authorities whose function you should understand. Of all your advisers, a real estate attorney may be in the best position to assist you with each phase of the transaction.

Types of Documents Used

Various documents are used to specify rights and obligations in real-estate transactions. Preprinted forms, individually drafted forms, or a combination may be used. Typical documents include listing agreements, real estate purchase contracts, and financing agreements.

Listing Agreements

The usual form of contract between a seller and broker is a listing agreement. It is usually a printed form, but the amount of commission, the duration of the agreement and duties of the broker are all items that may be negotiated. There are several forms of listing agreements, with great variation in terms, liability, duties and services rendered, which are normally negotiable.

Real Estate Purchase Contract

Often called an earnest money agreement, a real estate purchase contract is prepared to specify all the terms and conditions of the transaction. This document states the price and terms under which the buyer is obligated to buy and the seller is obligated to sell. It is a legally binding contract which establishes the respective rights and responsibilities of the purchaser and seller. An agreement for the sale of real estate is void and unenforceable unless it is in writing and signed by the buyer and seller. The buyer often makes a deposit, known as an earnest money deposit. The amount can vary and the deposit is usually applied to the down-payment obligation or to the buyer's share of the closing costs. The importance of the real estate purchase contract cannot be overstated, and it is advisable to have an experienced real estate broker or a real estate attorney review the document before signing. A buyer may lose the deposit and be liable for damages if an agreement is signed and he or she fails to abide by its terms. A seller who fails to perform after signing the agreement may also be liable for damages.

In addition to naming the parties, price and terms of the purchase, a purchase and sale agreement should also include the following items: legal description of the property; condition of the title (or legal right to ownership) and assumed debt; warranties of title (restrictions, rights or limitations) condition of property and of zoning or use rights (if applicable); prorations of taxes, special assessments, obligations and prorations regarding insurance premiums; stipulation of who bears costs for such items as recording fees; financing, if it is a contingency of the purchase; complete terms and documents to be used if the seller is supplying financing and receiving security for such financing (with copies of any such documents attached); items of furnishings, fixtures or appliances to be included or excluded; right of inspection (if any) given the buyer; date of possession; disclosures regarding the properties conditions; and conditions under which an offer may be canceled, as well as provisions for return or forfeiture of the deposit.

Financing Agreements

Banks, mortgage or insurance companies, some credit unions and other institutions are in the business of lending money to finance the purchase of real estate. Some financing, such as FHA-insured and VA-guaranteed loans, is insured by the federal government and may offer lower financing charges or extended terms of repayment. As an alternative to a conventional lending institution, a buyer may find a seller who is willing to finance the transaction. Under these arrangements, a seller receives a promissory note from the buyer and uses a mortgage, deed of trust, or similar instrument to secure payment and guarantee performance. Other financing options, such as the use of a land sales contract, assumption of the seller's mortgage, graduated payment plans, and adjustable-rate loans may also be worth investigation.

If financing is required to complete a transaction, a buyer should be sure the purchase and sale agreement specifies that requirement as a condition of the purchase. Furthermore, the buyer usually has the responsibility for finding a financing commitment by a certain date. The agreements used to secure a debt with real property are usually lengthy and complex. Such agreements affect the payment of money to a seller, a lender, or both, and establish a security interest in your real property or home. Even with a "standardized" form, legal advice may be necessary to fully understand the details, obligations and legal consequences of the documents. It may also be necessary for your lawyer to tailor certain items to meet your requirements.

Use of Security Instruments

Several methods and various security instruments may be used for real-estate loans, each with different obligations and consequences. A mortgage and a deed of trust are security instruments that pledge to the lender an interest in your real estate to secure payment of a promissory note. A mortgage is the instrument, usually held by the lender, by which the property is pledged to secure the payment of a debt or obligation. A deed of trust has similar functions, but is usually held "in trust" by a trustee and is the security instrument generally used in Utah. The promissory note acknowledges a borrower's formal obligation to repay the loan. Under some types of security instruments, a buyer who fails to pay on time can lose the pledged property or may be required to pay additional amounts on the loan. A real estate installment sales contract or a land sales contract is an agreement between the seller and buyer that states the purchase price and method of payment, as well as other rights and duties. The buyer usually does not receive a deed (or legal title) to the property until all required payments are made. In the event of default, payments may be forfeited, and the buyer's interest in the property may be lost.

Expenses and Taxes

In addition to the loan, there may be other costs involved in buying property. These costs will usually be itemized at the time of closing. In addition to fees and expenses, every real estate transaction has certain tax effects upon the parties involved. Steps may be taken when negotiating the initial purchase and sale agreement to reduce or adjust tax obligations or postpone payments. Federal income tax, estate taxes, excise taxes and other consequences are complicated and the laws frequently change. When you are either buying or selling real estate, advice from a real estate attorney is highly beneficial in understanding and dealing with taxes.

Real estate title is evidence of legal ownership. When selling real estate, it is important to obtain assurance of your ability to transfer the property free and clear of defects. When buying real estate, it is important to assure your right to occupy, use or eventually resell it without interference. Previous ownership and a title's "marketability" can be verified by title insurance.

Title Insurance

Title Insurance offers protection against financial loss and expense of defending your title in court. Owner's title insurance protects the buyer against future loss resulting from current defects in the title to the property. Before closing, the title company conducts a thorough examination of public records to uncover possible title defects. Easements, unpaid taxes or mortgages, judgments against previous owners, and other defects will be disclosed or cleared before closing. If a problem arises after closing, and the defect is covered by your policy, your title insurance company will defend your title to the property, in court if necessary, and at their expense. Owners title insurance policies insure your property for as long as you maintain your interest in it against these hidden risks that would not be disclosed by the public records: forgery, fraud, undue influence, false impersonation, misrepresentation, undisclosed or missing heirs, wills not properly probated, mistaken interpretation of wills, incompetence of grantors, birth of heirs subsequent to a will, deeds executed under expired or false powers of attorney, confusion due to similar names, rights of ex-spouses of former owners, incorrect indexing by the county, clerical errors in documents, and delivery of deeds after the death of a grantor. The fee for title insurance is a one-time premium which is paid at closing. In Utah, this premium is normally paid by the seller. If you are purchasing the property with a loan, your lender will require you to obtain lender's title insurance to protect their interest in the property.

The final stage in the purchase of real estate is called closing or "settlement." This sometimes complex procedure occurs when the parties submit the final documents required to complete the sale according to terms of the purchase agreement. Money and documents are usually exchanged at the time of closing and deposited in escrow with the escrow agent. Title companies usually provide escrow services. Escrow services by a third party are essential to the proper closing and recording of instruments and delivery of monies. It should be remembered, however, that escrow agents obtain information and take their instruction from the parties; they do not guarantee or protect the rights of either party in assuring that documents are consistent with either party's understanding of the transaction.

One of the most important instruments for closing is a deed, which transfers ownership of property from the seller to the buyer. There are several types of deeds, such as "warranty deed," "special warranty deed,” and "quit claim deed." The type of deed affects the buyer's rights against the seller. The manner in which the buyer's name appears on the document is also important, since it may affect the form of ownership and the tax liability of the owner. All documents of ownership of real property and those reflecting a security interest in real property should be recorded (officially filed) in the county where the property is located. This procedure is necessary to protect one's ownership of property and is usually performed by the title company. To be eligible for recording, the documents must meet certain statutory requirements.

GT Title Services 

Through its licensed real estate attorneys, title officers and escrow officers, GT Title Services provides cost-effective, professional-quality real estate transaction services. GT Title is able to provide clients COMPLETE assurance in their real estate transactions by providing the important combination of legal advice (through its attorneys) along with title insurance policies and escrow/closing services.

Keywords: Estate Transactions, Insurance, Insurance Policies, Licensed Real Estate, Real Estate, title insurance