In the process of settling on a sale or purchase of real estate, or in the closing of a mortgage loan, many questions arise. Buyers, borrowers and sellers frequently ask the questions set forth below.

The questions are segregated into two categories: the first addresses general background concepts and the second looks at more specific settlement or closing matters. Please call us at (703) 270-1800 or send us an email at info@candotitle.com for further clarification.

Section One: “Title” to land – the foundation of real estate ownership and transactions.

1. What is “title”? 

In the context of real estate, “title” is the evidence of the right that a person (or legal entity) has to the ownership and possession of land. Such right or possession can be exclusive, or it can be subject to the rights of other parties. Unlike other forms of property, known as personal property (such as automobiles, boats or airplanes), title to real estate is not evidenced by a “certificate of title” issued by an agency of government. It is much more abstract in nature.

2. What is a title search and who performs the search?

A title search is a historical trace of the transactions and other matter of record that affect the subject property over a defined period of time. The search is a physical on-site, or an electronic search of the public records of the jurisdiction in which the land is located. The records, commonly referred to as “land records,” may be in the form of books, paper files, cards, microfilm, microfiche or in digital records. Searches also include records of the tax assessor and tax collector for that jurisdiction. The Clerk of the Court is the officer charged with maintaining the records of the Court.

The records consist of:

• Records of land transfers made by deed, deed of trust, will or other written instrument. They are indexed by the names of the parties to the instruments and are maintained by date and time in the chronological order that they were recorded;
• Probate records of the court of record of the jurisdiction, usually the Circuit Court;
• Orders and decrees in all matters and cases adjudicated by that court; and
• Records of judgments, tax and other liens, takings under condemnation procedures, and other matters that are maintained by the court pursuant to state law.

Virginia law (and the law of most other states) establishes a continuing lien for real estate taxes, whether or not the taxes assessed are due and payable.

A title search is performed by a person versed in the purpose of the records and the manner in which the Clerk of the Court records, indexes and maintains the records. The searcher locates and identifies the relevant records, and presents them in the form of a report or “abstract”, but does not form opinions or conclusions with respect to title based on the records. A searcher need not be an attorney.

3. What is “title insurance”?

Title insurance is insurance against loss or damage arising or resulting from defects in, or the failure of title, to a particular parcel of real property. It is based upon the quality or condition of title as established by a search of public records at a particular point in time and an examination of the title.

Title insurance coverage is established by the issuance of a policy by the title insurer or its policy-writing agent. Title insurance is regulated by state law, and title insurance companies must be licensed in each state in which they sell their products. They must meet certain statutory capitalization and reserve requirements, and must conduct their business in conformance with law and regulation. Title insurers differ from other insurers in that they may sell only title insurance and no other type of insurance. Title insurance is often referred to as a “mono-line” (rather than “multi-line”) insurance product.

4. What is a title examination, who performs it, and how does it become a policy of title insurance?

An examination of title is based on the title search, presented in the form of a report or abstract. The report or abstract is typically presented in a short-hand form used by searchers or “abstractors”. The examiner gives an “opinion” regarding the condition or quality of the title as it is reflected in the records on the date of the search.

A title examiner must be expert in interpreting and understanding the instruments and other forms of data that comprise the records, and their effect on the title to real property. An examiner is often (but need not be) an attorney. However, a non-attorney can give an opinion of title only to his or her employer, usually a title insurer or title insurance agency.

The opinion of title is for use in writing or extending title insurance coverage, and the examination is performed as a part of the function of risk underwriting. As a general proposition, the underwriting of title insurance is a process of risk elimination. In theory, the only risk that should be underwritten is the risk of off-record facts and events – matters that cannot be discerned by a search and examination of the land records. In a perfect world, the records would disclose every element of risk. In the real world, there are numerous matters that routinely cannot be discerned from a search and examination.

Title insurance coverage for a particular property begins with the issuance of a “commitment to insure” written on a form promulgated by a title insurance company. The commitment reflects the underwritten product of the raw data found in the records by the searcher. It prescribes as “requirements” the actions that are necessary to correct, perfect or eliminate normal title matters routinely handled in real estate transactions, and it exempts, or “excepts”, from coverage those matters that affect title and cannot be eliminated.

Most of those matters, though they affect title, are not considered “defects in title”, but rather “conditions of title”. Common examples include restrictive covenants, easements and rights of way. The commitment to insure binds coverage until the transaction is complete, the transfer is a matter of record, and the final policies reflecting the transaction and insuring the validity and priority of the relevant instruments are issued to the insured parties.

5. Properties are typically transferred over and over, with searches performed each time. What can possibly be wrong with the title to property?

The array of possible defects or clouds (sometimes called “title hazards”) is extensive. Some of the most commonly encountered defects include:

• Errors in searches or examinations of title  
• Creditor claims or liens  
• Forged, fraudulent or improperly executed deeds or other legal instruments  
• Instruments executed under duress  
• Errors in deeds and other instruments  
• Incorrect legal descriptions of property  
• Unpaid or delinquent real estate taxes or other taxes or charges resulting in liens  
• Unknown or undisclosed heirs or after discovery of wills or trusts  
• Unresolved probate problems  
• Rights of spouses  
• Conveyances made by parties without legal capacity  
• Failure of conveyances arising from mistaken interpretation of wills or trusts or misrepresentations of parties  
• Unknown claims of adverse possession or prescriptive easement  
• Improper delivery of instruments  
• unrecorded or improperly recorded or improperly indexed instruments

A particularly serious defect is the lack of access to and from the property.

6. As a purchaser of real estate, do I need title insurance?

In most instances, if a mortgage lender is involved in the purchase of real estate, a loan policy of title insurance will be a lender requirement. A prudent purchaser will also purchase the optional owner’s title insurance to protect what often is the largest investment of a lifetime. Although the premium for an owner’s policy is higher, when owner’s coverage is purchased, lender’s coverage is included for a nominal fee.

7. Is all title insurance the same?

Not all title insurance is the same, and it is helpful for the purchaser/borrower to understand how different policies and coverages vary from one another.

Title insurance coverage is written on a number of different types of policies, and the premium for those policies varies according to risk. The two most common policies are the “Owners” policy and the “Lender’s” policy. The latest versions of these policies were approved by the American Land Title Association (ALTA) in 2006.

The Owner’s policy is typically offered to the buyer in sale/purchase transactions, and the Lender’s policy is typically required by the terms of mortgage loan agreements when a mortgage loan is originated in a sale/purchase or in a refinance transaction. Unless otherwise specifically provided, the buyer/borrower pays the premium for both policies.

When issued at the same time, both policies are usually offered for the cost of the Owner’s policy, plus a modest work charge – a “simultaneous issue fee”. In some cases, a discount called a “reissue rate” is offered when the title being insured has been insured previously. The terms of the reissue rate vary from insurer to insurer and from jurisdiction to jurisdiction. A buyer/borrower should inquire about the availability of a reissue rate.

Since 1998, title insurers in most states have offered enhanced title insurance coverage through a distinct policy - the Homeowners Policy of Title Insurance (HPT) Policy. The policy is available at a premium slightly higher than the premium for the standard Owner’s Policy, and the coverage is more extensive. Title insurance premiums are “one time” premiums – that is, the premium is collected only once while the coverage remains in tact as long as the mortgage (deed of trust) is in effect in the case of the lender’s policy, or as long as the insured owner owns or has any liability to subsequent owners under his instrument of conveyance (usually a deed).

8. Does all title insurance cost the same amount of money?

Title insurance premiums are regulated to some extent in most states, though the actual rates can vary somewhat from company to company. In most cases (commercial projects are an exception), the rates will prove to be very similar. Rate tables are available and you can access them online through the links provided elsewhere on this site. Rate tables can be somewhat confusing, but we will be happy to answer specific questions by telephone or by e-mail if you contact us.

9. Who pays for title insurance?

In the jurisdictions served by C&O Title Company, by custom and practice, the purchaser is the party responsible for the purchase of, and payment for, title insurance. Under special circumstances, custom and practice may be varied by the contract between purchaser and seller.

Section Two: The process of settling or closing real estate transactions – usually the sale and purchase of property and the closing of mortgage loan transactions.

1. In a real estate transaction, who selects the settlement agent?

The purchaser has the right to select the settlement agent in the usual sale and purchase of real estate, except under special circumstances. For a refinance of a first mortgage, the borrower selects the closing agent. In the case of a second mortgage, equity line or credit line, there is often no closing agent, and the entire matter is handled by the lender.

Real estate brokers and agents, builder/developers, and other parties involved in real estate transactions sometimes have an affiliation with, or preference for, a particular settlement agent and may attempt to influence the purchaser’s selection. Likewise, in the refinancing of a first mortgage, the loan officer or broker may attempt to influence the borrower’s selection of a closing agent. The choice, however, lies with the purchaser or borrower.

2. As a purchaser or seller of real estate, do I need the services of an attorney?

The answer depends on the particular circumstances of the transaction, and is a matter of personal choice and discretion. In the jurisdictions served by C&O Title Company, settlements and loan closings are most often performed by non-attorney settlement agents.

Only an attorney licensed in the particular state, and acting in his/her representative capacity as counsel for the client, and not as an employee of a settlement agent, may give legal advice to a purchaser or seller in a real estate transaction. That means that an attorney who is employed by a settlement agent cannot, in that capacity, represent any party to a transaction being settled by that settlement agent.

As a purchaser or seller, you should be aware that a settlement agent advertising that its closing officers are attorneys does not mean that you will have the benefit of legal representation or will receive legal advice.

Attorneys should be selected with care. Attorneys in private practice can undertake real estate settlements and represent a party to a settlement – provided that the representation is disclosed to all parties and conflicting representation is not undertaken. C&O Title Company, LLC is affiliated with the law firm of Cochran & Owen, LLC and can make referrals to attorneys of the law firm when appropriate.

3. What is a closing or settlement?

A settlement or closing is the process of executing, delivering and recording the legal documents necessary to give effect to a contract of purchase and sale or a mortgage loan agreement and commitment, together with the payment, receipt, disbursement and accounting of all funds to be paid and applied.

Referred to as “escrow” in some parts of the United States, the process involves the holding in trust (or escrow) of the documents and funds until all obligations by all parties are performed and discharged. Closing usually is shorthand for “closing escrow,” meaning that all functions are complete, title is properly transferred, all funds are properly applied including the purchase money, all loan funds, commissions, taxes, mortgage payoffs, recording taxes, fees and charges, and the like. All such functions are the responsibility of the settlement agent who acts as a fiduciary for, and is and accountable to, all parties.

4. Who pays for the settlement or closing?

The purchaser and the seller each pay the settlement agent for services rendered or contracted for on the particular party’s behalf. In addition, the borrower usually pays the premium for title insurance, a portion of which is remitted to the title insurance company.

Typically, a number of other fees and charges for services requisite to the settlement of closing of the transaction are made by:

• The seller’s real estate broker
• The borrower’s lender
• Other vendors including the title abstractor, the surveyor, the termite inspector, and the clerk of the court.

All fees and charges made in connection with residential (1-4 unit) settlements or closings are enumerated on a federally-mandated form, the HUD-1 (or HUD-1A) Settlement Statement. The amounts and payees are indicated on the HUD-1, and the settlement agent has supporting documentation for each such charge.

5. What is a deed?

A deed is a written instrument or document employed for the purpose of transferring title to property. For our purposes, the property will always be real estate.

6. What is a mortgage?

The term “mortgage” commonly refers to a loan for which real estate is given as collateral.  In some states a mortgage is also the written instrument that establishes the loan, the repayment terms and that is recorded to encumber the title to real property.   In Virginia, Maryland and D.C., am “mortgage” loan is typically:

• Evidenced by a promissory note executed by the borrower and payable to the order of the lender
• Secured by a deed of trust executed by the borrower and any co-owner that is recorded in the records of the appropriate circuit court to establish a lien in the amount of the loan (or loan balance) against specific real property of the borrower.