Buying A Home

A real estate title is a right to partial or whole ownership to land and improvements upon the property. If you can prove your title against all the world and the evidence or proof of ownership is contained in proper public records and if it is for whole ownership, it is a marketable title. A marketable title is free from reasonable doubt.

When purchasing a home, you should request a “marketable” title. Your lawyer, after proper investigation, can tell you whether the seller is able to convey such a title to you. No one can advise you without a proper investigation.

A warranty deed is a conveyance of title plus some warranties or guarantees. The usual guarantees or warranties by the seller are: good title, freedom from encumbrance other than as excepted, possession to the buyer as against all others, and a promise to defend title.

These guarantees alone are not adequate protection since they are no better than the present and future financial responsibility of the seller. A warranty from a financially responsible seller is comforting and desirable but is not a substitute for a title examination and title insurance. Title defects have a way of lying dormant for years and perplexing a buyer long after he has paid for the land and after the seller has disappeared or died.

A title examination is a study of title evidence from the public records, which can be from an abstract of title or computer records. (An abstract of title is a collection of public records relating to the ownership of a parcel of real estate. In many counties, centralized computer records have replaced abstracts.) Your lawyer examines the applicable title information to determine who owns the lands, defects in or claims against the ownership and any action needed to secure good record title.

This may seem to be a simple operation. It is not. It requires interpreting numerous deeds, mortgages, wills, court decrees and other instruments; considering the time sequence of transactions and events affecting the title; and applying laws and court decisions to the various situations disclosed in the applicable title information.

The examination of a title requires a thorough knowledge of many areas of law and even when certain laws went into effect or were amended or repealed. An examination of applicable title information may involve evaluating a variety of problems such as the validity of divorces, the effectiveness of foreclosures, the scope of restrictions, the presence of federal and state tax liens, and the effect of old claims against the land.

Whether examining an old U.S. patent or passing on a deed of recent date, the process of examination is, at every step, the consideration of legal problems. Experience can speed up the work, but attorneys almost daily encounter new situations requiring new legal research.

A lawyer can bolster the title examination by issuing or obtaining for you an owner’s policy of title insurance. In such a policy, the title insurance company contracts with the insured person named in the policy to protect the title as insured against financial loss and the cost of defending the title in court.

But like any insurance policy, the coverage is no greater than as stated in the policy. Any policy can list matters substantially affecting title that are exceptions to the coverage and are not insured. Another type of policy, mortgagee’s or lender’s title insurance, protects only the holder of the mortgage and not the owner. You should not forego owner’s title insurance coverage because your lender has its own loan policy. In fact, obtaining both the owner’s and lender’s title policies at the same time is not much more expensive than obtaining a single policy.

A lawyer representing your interest can advise the extent of protection given by your owner’s policy. Even if your attorney does not issue your title policy (as is the practice in certain counties and often when purchasing new residences from developers), your attorney can advise you whether the exceptions from coverage listed in the title insurance commitment will be appropriate under the contract or detrimental to you when they are included in the final title policy. Some attorneys include the policy’s cost in an overall charge for all legal services. Other attorneys separate the charge with the cost for the policy being based on the real estate purchase price. This price is the maximum amount for which you are insured. There is only a one-time charge for an owner’s policy and its protection continues long after you sell the property so you should hold onto the policy indefinitely.

Buyers often have the title to a home placed in a joint ownership arrangement with special words inserted so that title passes automatically to the survivor when one of the joint owners dies. This arrangement is known as “joint tenancy.” In Florida, when land is owned jointly by husband and wife, it is known as an “estate by entirety.” Owning property in this manner may be a good idea for some, but, again, it may not be good for you. You should determine the income, gift and death tax consequences before having your home placed in joint ownership. An attorney can advise you regarding this important decision.

Joint ownership occasionally leads to lawsuits over a right of occupancy, the right to the rents if not occupied by all the joint owners, and the duties of the various owners as to payment of mortgages, taxes, and cost of repairs and upkeep. If the joint owners are parent and child, or brothers and sisters, the subsequent marriage of one of them may lead to conflicts and complications.

If the home you are buying is still under construction or has been completed recently, special care is required to make sure that all building costs have been paid by the sellers and that you are fully protected as to the provisions of the Florida Construction Lien Law. You should consult your lawyer for full information as to your rights and responsibilities under this law.

This may be true also when repairs on a house have been made recently or building material recently delivered.

Failure to protect against construction liens can result in the property being subject to liens even though the full contract price was paid.

Many financing arrangements are available to today’s home buyers: variable rate mortgages, conventional mortgages, government insured VA and FHA loans, as well as specialized mortgages designed for specific financial institutions.

An attorney can help you determine the most advantageous plan, based on your needs and capabilities to repay, including certain tax advantages appropriate to your personal financial situation.

Regardless of the type mortgage loan, you should be aware of specific terms the lender may require such as:

• prepayment penalties
• limitation of your right to sell without lender’s consent
• maintenance of insurance levels
• tax and insurance escrow payments
• limitations on your use of the property
• lender’s right to change interest rates if you assume an existing mortgage
• lender’s right to change interest rates during term of the loan

You should also determine if, in the future, you’ll be allowed to borrow additional money secured by the same mortgage. You’ll want to ask an attorney to explain all costs of the loan, including service charges, appraisal fees, survey costs, escrow fees, and lender’s attorneys’ fees.

Remember, when you sign a mortgage note, you are ordinarily responsible for the full payment of the total indebtedness. Even if you later sell to someone who agrees to assume payment of the mortgage, your responsibility continues unless the lender releases you.

Closing a real estate sale is a technical and complex procedure. The careful drafting of papers to carry out the actual intent of the parties is part of the job. Meeting the technical title requirements is another step. The proper signing and acknowledgement of papers is another. Delivery and recording of the papers are usually the last steps.

As a careful buyer, you should insist that your lawyer be present at the closing, checking each detail to assist you making your purchase the trouble-free ownership to which you are entitled.