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| What
is title insurance and should I purchase a policy? There are two categories of title insurance policies. The first one is typically referred to as the “lender’s policy” and the second is called the “owner’s policy”. A lender’s policy is almost always required by the lender and is paid for by the buyer. In Massachusetts, the current fee for a Lender’s policy is $2.50 per thousand up to the mortgage amount. A standard owner’s policy currently costs $3.65 per thousand. You are eligible to purchase an “enhanced owner’s policy” if the insured property is or will become your primary or second home. The cost of the enhanced policy is $4.00 per thousand. If you are obtaining a mortgage and purchasing an owner’s policy at the same time, a simultaneous discount applies, wherein you disregard the cost of the lender’s policy and calculate the entire policy based upon the purchase price plus a $100.00 simultaneous fee charge. Example: You are purchasing a primary residence for $200,000.00 and obtaining a purchase money mortgage on the residence for $175.000.00. The premium for an enhanced owners policy and the required lenders policy will be $900 ($4.00 x 200.00 = $800.00 + $100.00 simultaneous fee charge). An “enhanced owner’s policy” insures against many additional risks, some of which may occur subsequent to closing. For example, an enhanced policy provides coverage for losses resulting from your neighbor building over the lot line after the closing. For a detailed outline of the benefits of standard vs. the enhanced policy (called Eagle Policy by First American Title Insurance Company) please click here.
Title insurance protects the insured against a wide array of problems. The policy insures against various title defects whether or not the title examiner should have discovered them during the search. Also, title insurance will protect an innocent party against fraud. Many title insurance policies provide inflation guard protection with increases in coverage up to 25% during the first five years of the policy life. Owner’s title insurance is a good value as the policy is in force for the entire time a person owns the property for the initial cost discussed above.
There are three primary ways in which to hold title in Massachusetts. The first is Joint Tenants wherein upon the death of one owner, his or her interest passes to the remaining Joint Tenants without the necessity of probating a Last Will and Testament. The second form of ownership is Tenants in Common, whereby each owner has a percentage of ownership in the property. Upon death, the co-owner’s share would pass through his or her estate and not to the remaining partners. The third is a special form of ownership for married couples called Tenants by the Entirety with the right of survivorship. If one spouse dies, the remaining spouse automatically acquires the deceased spouse’s interest
Many persons hold properties in trust; however, many lenders do not allow trusts to be used for residential financing,
It is best to have all parties present at the closing, but sometimes attendance is not possible. In that case, there are a couple of options. The absent party can grant a Power of Attorney to a third party who attends the closing and signs on his/her behalf. However; some lenders will not allow the use of a Power of Attorney. Another option is to have all of the closing documents sent to the parties ahead of time. The documents must be signed in front of a notary public and returned prior to the closing. The “closing” of a real estate transaction is when all parties meet and sign all of the documents necessary to purchase and/or mortgage the property. Generally, the buyers, sellers, real estate brokers and attorneys attend. The closing generally takes about an hour. The closing attorney collects all monies from the buyer and lender and deposits them into his clients trust account. The attorney then issues checks to all parties based on the items listed on the Settlement Statement. Because the funds are deposited the same day checks must be written, “good funds” are necessary. |