Depending on the State in which you live, real estate laws differ. In Arizona for example, Title Companies participate in real estate transactions. In Ohio, and even Canada, real property transactions are served by Lawyers. The Title Company or Attorney acts as a “neutral” or “third party” to the buyer or seller. Below are the most common Title and Escrow terms used in real estate transactions.
escrow account – A segregated account created by a lender or escrow agent so that the lender can fulfill certain financial obligations related to the mortgage on behalf of the borrower. The borrower contributes to an escrow account each month, as a portion of the mortgage payment is set aside for this account. Fees funded by an escrow account include homeowners insurance and property taxes.
Escrow Closing – The final act in a real property transaction where the title of the property passes from the seller to the buyer.
Real Estate Settlement Procedure Act (RESPA) – A federal law, designed to protect consumers, requires disclosure of estimates of specific settlement costs in the sale of a home or residential property, which federally insured lenders wish to finance. Lenders are required by law to disclose this information once after the loan application is submitted and again before or at closing.
Title – Also known as “deed”. Title is a legal term that defines ownership of real property and the owner’s right to claim property. It is recorded and kept on file at the county registrar’s office.
Company Title – Business entities that act as neutral parties or third parties in real estate transactions. They do a thorough check of real property titles. They report these findings for the purpose of ensuring that the rights are legally free and free from liens and encumbrances. Title companies also provide title insurance to protect the property owner’s future losses caused by situations such as unknown title defects or previous claims against the property.
Insurance title – Policies that indemnify lenders and homeowners against title defects. It also guarantees possible claims against property titles not found in title searches.
Title search – In-depth review of public records and court actions involving real property titles. This ensures that the seller has the legal right to sell and transfer ownership of the property. A title search reveals the name of the owner in the chain of ownership and other applicable information including confiscations, liens and any claims that may affect his ownership. This can include unpaid claims, liens, unknown heirs, and special judgments due.
Guardian – A neutral party entrusted with legal title to a property to manage it on behalf of another party.
Whether a real estate transaction is serviced by a Title Company or an Attorney, there are requirements that every buyer and seller should be aware of. Understanding and becoming familiar with these terms Title and Escrow will ensure a smoother transaction for all concerned parties.
