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Stockton Title Insurance & Escrow

California Title Insurance And Escrow Process

Title and escrow is a process. When a homebuyer and a home seller come to terms, the process opens with the preparation of a purchase contract and closes with the issuance of a title policy. Title insurance is one of the key elements in the title and escrow process. A prefatory step is the creation of the contract between the parties. This contract, called closing or escrow instructions in most areas, is usually prepared by a Escrow/Title company. It binds the parties and sets in motion the steps leading to the closing.

List of Stockton Escrow/Title Companies

In Northern California the closing agent is normally a Title and Escrow Company.

Escrow Closing practices vary from locality to locality, and even within the same county or city. Closing may be conducted by lenders, title insurance companies, escrow companies, real estate brokers or attorneys for the buyer or seller.

In California, closing may be conducted by an escrow agent. The parties sign an escrow agreement which requires them to provide certain documents and funds to the agent. Unlike other types of closing, the parties do not meet around a table to sign documents. Ask your agent how your closing will be handled.

1031 Exchanges

1031 Exchanges are a way of protecting your hard earned money. Consulting with your financial advisor, tax attorney and/or your CPA is always recommended. The following is intended to be used as an introduction to exchanges.

Simultaneous Exchanges

In this type of exchange the sale, relinquished property and the purchase of the replacement property occur on the same day. This type of exchange normally needs the service or a qualified intermediary.

Delay Exchanges

The exchanger has a maximum of 180 Days from the date of closing on the relinquished property or the due day of the tax return for the year the property was sold, (whichever occurs first unless the taxpayer applies for a tax filing extension) to acquire the replacement property.

Improvement Exchanges

This type of exchange is sometimes called a construction exchange. One way of using this type of exchange is when the replacement property is of lesser value than the relinquished property at the time it is to be purchased. In that case the Intermediary can acquire the replacement property on behalf of the exchanger and have improvements made to it during the exchange period. These additions to the value of the replacement property can either be in the form of new construction or improvements to an existing building. After the improvements are completed the replacement property is transferred in the exchangor prior to the completion of the exchange period.

Reverse Exchanges

In this type of exchange the investor first locates a replacement property and provides the funds for the Intermediary to purchase the replacement property and go on title before selling the relinquished property.

Title Search and Exam:

The title company orders the information needed to analyze the condition of the title. A title search is performed and real estate tax amounts are obtained. The title searching process is difficult because the public records in the vast majority of jurisdictions are organized by the names of the parties to a recorded document. For instance, a deed from Tom Smith to Bill Jones is indexed in the grantor books under the name Smith and the grantee books under Jones. A search of a property owned by Bill Jones requires analysis of each recorded document involving Bill Jones. Since Bill Jones is a common name, in a large county many documents involving other people named Bill Jones (and other properties) must be analyzed. It is a slow and expensive way to search. Consequently, in most areas title companies duplicate the records and, usually arrange them by property rather than names. These are called title “plants.” Title companies invest millions of dollars each year in creating plants.

Deeds, mortgages, easements, covenants and other matters disclosed by the search are analyzed and summarized in a title commitment. This commitment forms the basis of the process of title clearing.

Closing and Settlement:

The title company prepares the documents needed to transfer the title, create a first mortgage in favor of the lender, and release the prior mortgage. In most cases the title company prepares the deed, orders amounts due on the existing loan, and acts as a clearinghouse for the new loan documents and the pay-off and release of the old loan and mortgage. Very often, the pieces are not complete when the new lender is ready to fund and the buyer is ready to move in. The old mortgage may not be released, quitclaim deeds may be needed from heirs, and ancient easements may threaten development rights. Title companies often issue a title policy which insures the new owner and new first mortgage lender before the documentation is complete.

Deed or Lien Perfection:

The title company completes the documentation and records the deed and the mortgage, along with the necessary fees normally in the county seat, which is normally San Joaquin County when you buy or sell a home in Stockton or Lodi.
In the meantime, the lender has funded the loan and the buyer has moved in. Occasionally, when a title problem can’t be cleared, the title insurance company pays a claim. The industry pays hundreds of millions of dollars in claims each year.

Title insurance is among the more expensive entries on a closing statement. However, title insurance fees actually subsidize the other, labor-intensive segments of the process, such as examination. Further, when viewed as a part of the process, the fees are modest. In looking at the whole transaction, the title and closing process is often less than 1 percent of the mortgage amount, in comparison to the 5 or 6 percent real estate brokerage fee, and the loan origination fees that frequently begin at 1 percent.

Chicago Blog by Jeff Lee