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Title Insurance 101

There seems to be a lot of hoops to jump through to close on the sale of a property. For the novice buyer the steps in the process can by dizzying to say the least. Still, one must keep a level head to complete transactions with aplomb in today's dog eat dog Real Estate world. Keeping a handle on Title Transfer and Title Insurance will help to seal the deal with ease and take the pressure off of you.

Title Transfer

The title of a property is the proof (deed) that a person or entity actually owns the property or land in question for sale. You can imagine how many disappointed and angry people in the past took many steps in the closing process only to find some impropriety happened that put the brakes on the deal. Legal Title ownership usually trumps Equitable Title a.k.a possession or residence (whom enjoys the property).

Title Insurance

Especially in a market flooded with Short Sales, distressed properties and REO's most lenders require buyers to carry some form of title insurance as part of every transaction. Insurance, as in all other cases is to protect all parties (buyer, seller and lender) and should not be taken lightly. Lenders universally lean on the American Land Title Association (ALTA) guidelines for loan policies on transactions, which mandates insurance be utilized. Even cash for property transactions have some amount of insurance attached to them.

Transfer Taxes

Most states, cities and other municipalities demand some type of Real Estate Transfer Tax for most transactions. Normally they can range from a small fraction of a percent of the total sale cost to 4-6% in other places like major cities with high taxes rates. Some locales demand that the transfer taxes be split between buyer and seller and often come with ceilings on a total by the buyer. As part of your due diligence you should consult your local government assessors office on tax rates before beginning the sale process.

The Answer Is Choice

In most cases thanks to the Real Estate Settlement Procedures Act of 2007 or RESPA most investors and buyers can choose their own title insurance company. This was done to promote fairness, eliminate kickbacks and protect the consumer. If a property is distressed or the potential buyer has some credit history knocks against him or her, the lender may insist a certain title company be used. This is allowable under certain circumstances where the lender is taking on a greater risk than normal.

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