Title Insurance Info You Need to Know!

Title insurance insures against loss sustained by an insured party due to the condition of title being other than as insured. The beneficiaries of title insurance policies generally are real estate buyers and mortgage lenders. A title insurance policy protects the named insured against title defects, liens and encumbrances existing as of the date of the policy and not excepted from coverage. For a one-time premium, the policy remains in effect until the property is sold or refinanced. The title company is a neutral third party that performs the following functions in relation to the closing of a real estate transaction: back with pool (2)

Receives a complete and fully executed purchase and sales agreement and/or lender's instructions.
Orders and delivers a commitment for title insurance to the parties to the transation.
Orders all payoff statements and demands necessary to clear the title.
Obtains all documents needed to transfer title.
Prepares the settlement statement.
Obtains all necessary signatures and funds to close the transaction.
Records and delivers all documents and disburses the funds according to the parties

CONVEYANCE OF TITLE

GENERAL WARRANTY DEED
A deed used to convey fee title to real property that contains a covenant whereby the seller agrees to protect or warrant the buyer against being dispossessed because of any adverse claim against the property. Pursuant to Section 5.022 of the Texas Property Code, the deed warrants to the Grantee: That the Grantor has not

previously conveyed the estate or any interest therein to anyone except the Grantee; and The estate is free from encumbrances. The General Warranty Deed is the deed most used in insuring titles to real property and gives the most protection to the Grantee.

SPECIAL WARRANTY DEED
A deed that conveys real property guaranteeing or “warranting” only the title of the Grantor. This does not guarantee the title of any owner prior the current Grantor. These deeds are often used when the conveyance is from an executor, administrator, trustee, guardian, etc. There must be a valid reason for the Grantor to be limiting the warranty. We want to be certain that the Grantor does not have knowledge of some defect in thechain of title that is not being acknowledged.

WARRANTY DEED WITH VENDOR’S LIEN
A Warranty Deed that retains a lien (Vendor’s Lien) to secure money loaned to purchase the property.

DEED WITHOUT WARRANTY
A deed used to convey fee title to real property wherein seller does not agree to protect or warrant the buyer against being dispossessed because of any adverse claim against the property. It is used when the Grantor never had any real interest in the property for himself — perhaps an executor, administrator, receiver, trustee, guardian, etc. There are circumstances that would permit the use of a deed without warranty in thedirect chain of title, however, approval must be made on a case-by-case basis.

TRUSTEE’S DEED/SUBSTITUTE TRUSTEE’S DEED
A deed conveying real property bought at the Trustee’s Sale after the foreclosure of a lien.

QUITCLAIM DEED
A deed operating as a release that is intended to pass any title, interest, or claim which the grantor may have in the real property, but not containing any warranty of a valid interest or title in the grantor. Quit claim deeds are not acceptable in the direct chain of title and are normally used only for curative matters.

OTHER TYPES OF DEED:
Sheriff's Deed
Contract for Deed
Assumption Deed
Cash Deed

If you have any questions about deeds or conveying title, please call your Escrow Officer. We will be glad to help.

Following is a list of other articles and information you may find helpful. Again, if you have any questions, please give us a call!

Divorces
Forclosures
Power of Attorney
Saving on Home Taxes
Paying Taxes
Closing Payoffs
Tax Exemptions

1.Divorces

If the sellers have filed for a divorce, the title company must know if the judge has ruled on the final divorce decree in order to close the property. If a judgment has been rendered, the title company must have a certified copy of the decree which can either be obtained from the attorney handling the divorce or from the county courthouse (divorce decrees are not included as part of the abstract plant). If the divorce decree is ordered from the courthouse, it usually takes approximately three days to receive the certified copy.

When the final decree has been filed, the closing is handled per the instructions of the decree as to the property and distribution of the proceeds. If possession of the property goes to the wife per the decree, a warranty deed must be filed from the husband to the wife prior to closing or with the closing documents, and vice-versa.

If the final decree has not been filed, the title company must verify with the court that a temporary restraining order has not been put on the sale of property and/or that a receiver has not been appointed and qualified. If neither of the above has occurred, then the property would be conveyed jointly by husband and wife and the proceeds would go jointly to the husband and wife.

It is important to understand how a divorce could affect the sale of your client's property, therefore, if you would like to further discuss divorces, please call us.

2.Forclosures

Section 51.002 of the Property Code authorizes the non-judicial sale of real property as described in the power of sale clause in the deed of trust. The deed of trust must comply with Section 51.002 and the sale under the deed of trust must be made in accordance with the statute in order for the foreclosure sale to be valid.

Foreclosure proceedings may begin upon default of the secured debt. The note holder must provide the maker with notice of intent to accelerate as well as with a notice of acceleration. If the trustee named in the deed of trust is unavailable to foreclose the lien, it is necessary to appoint a substitute trustee as described in the deed of trust.

Section 51.002 also establishes the minimum requirements of the (substitute) trustee: posting the notice of sale, filing it with the County Clerk and serving by certified mail each debtor obligated to pay according to the records of the holder. Each loan document should also be reviewed for additional notice requirements. The notice of sale should contain the following:

description of lien;
description of indebtedness;
description of property;
statement of default;
request by proper party;
time, date and place of sale.

Trustee's sales must be conducted between 10:00 a.m. and 4:00 p.m. on the first Tuesday of the month in the county in which the property is located. The trustee conducts the sale by introducing himself as trustee, reading the notice aloud, announcing the terms of the sale and opening the bidding. Although the statute does not address the form in which payment must be made, most deeds of trust require that payment be in cash. After the sale, the trustee will execute and deliver a deed in favor of the purchaser.

If you have any questions regarding foreclosures, please do not hesitate to call.

3.Power of Attorney

In some transactions, where a buyer or seller is not able to attend closing due to illness or if they are out of town, Powers of Attorney become an option to keep the closing on track. Often there is uncertainty about what is required when a Power of Attorney is being used at closing. In order to convey title or mortgage property a “Specific Power of Attorney” must be used. This document must include the complete legal description of the property, be acknowledged by a Notary Public, and be recorded with the County Clerk.

There are two types of Power of Attorney: one for the seller and one for the buyer. Power to act for a seller or buyer is given to an “agent” who is mentioned in the document:

A seller’s Power of Attorney must state that the agent has the power to “convey title” or “sign a deed”. Giving the agent “power to sell” is not sufficient since it does not specify the power to convey.
A buyer’s Power of Attorney must give the agent specific power to sign a Note and deed of Trust to specifically mortgage the property.

Before Closing

Inform your Escrow Officer immediately if you believe a Power of Attorney will be necessary and they will guide you in the appropriate steps to take. Once a Power of Attorney has been executed and fully notarized, please fax it to your Escrow Officer along with a copy of the person's driver’s license and the Notary Public’s driver’s license as soon as possible so that they may review the fully executed document for accuracy. Having your Power of Attorney before closing will also allow your Escrow Officer to coordinate the preparation of the closing documents as the papers will be prepared differently than if the person were available to sign them themselves.

In all cases, the lender (if any) involved in the transaction must approve any use of a Power of Attorney, and the form must be approved by First American.

On Closing Day

Your Escrow Officer must have the original Power of Attorney on the day of closing in order to file it with the appropriate County Clerk’s office. Keep in mind that the person(s) giving the Power of Attorney must be contacted by First American Title on closing day to verify that they are alive and well and have not revoked the Power of Attorney. They must, therefore, be available that day and we must have a means of contacting them.

If you have any questions concerning Power's of Attorney, please feel free to call your Escrow Officer.

4.Saving on Home Taxes

An exemption removes part of the value of your property from taxation and lowers your taxes. For example, if your home is valued at $50,000 and you qualify for a $15,000 exemption, you pay taxes on your home as if it was worth only $35,000. Other than exemptions for disabled veterans or survivors, these exemptions apply only for your homestead. They do not apply to other property you own.

Does your home qualify for exemptions?

You must own your home.

To qualify for a general or disabled homestead exemption, you must own your home on January 1. If you are 65 years of age or older, you need not own your home on January 1.

You will qualify for the over-65 exemption as soon as you turn 65, own the home, and live in it as your principal residence. You will receive the exemption as of January 1.

Your homestead can be a separate structure, condominium, or a mobile home located on leased land, as long as you own it. Your homestead can include up to 20 acres if the land is used as your yard. A residence may be owned by an individual through an interest in a qualifying beneficial trust and may be occupied by a trustor of a qualifying trust. If you are not the sole owner of the home, you will receive only a portion of any qualified exemption, based on your percent of ownership. For example, you own a 25-percent interest in a homestead valued at $100,000, for a total value of $25,000. You will receive 25 percent of a $15,000 school homestead exemption, or $3,750.

You must use the home as your principal residence on January 1.

If you have more than one house, you can only get exemptions for your main or principal residence. You must live in this home on January 1. If you temporarily move away from your home, you can still get an exemption if you don't establish another principal residence and you intend to return. For instance, if you enter a nursing home, your home still qualifies as your homestead if you intend to return.

Renting part of your home or using part of it for a business doesn't disqualify the rest of your home for the exemption.

Note: Texas has two distinct laws for designating a homestead. The Texas Tax Code offers homeowners a way to apply for homestead exemptions to reduce local property taxes. The Texas Property Code allows homeowners to designate their homesteads to protect them from a forced sale to satisfy creditors. This law doesn't protect homeowners from tax foreclosure sales of their homes for delinquent taxes.

What home exemptions are there?

School taxes -- all homeowners

You will qualify for a $15,000 homestead exemption on your home's value for school taxes.

County taxes -- all homeowners

If your county collects a special tax for farm-to-market roads or flood control, you will receive a $3,000 exemption for this tax. If you qualify for local-option exemptions for age 65 or older homeowners, or disabled homeowners (next section), you will receive only the local-option exemptions.

Optional exemptions -- all homeowners

Any taxing unit, including a school district, city, county, or special district, may offer an exemption for up to 20 percent of your home's value. The amount of an optional exemption can't be less than $5,000, no matter what the percentage is. For example, if your home is valued at $20,000 and your city offers a 20-percent exemption, your exemption is $5,000, even though 20 percent of $20,000 is just $4,000.

Each taxing unit decides whether it will offer the exemption and at what percentage. This percentage exemption is added to any other home exemption for which you qualify. The taxing unit must decide before July 1 of the tax year to offer this exemption.

Age 65 or older homeowners

If you are age 65 or older, your residence homestead will qualify for more exemptions. You will qualify for a $10,000 homestead exemption for the school taxes on your home's value, in addition to the $15,000 exemption for all homeowners. If you qualify for both the $10,000 exemption for over-65 homeowners and the $10,000 exemption for disabled homeowners (see the following section), you must choose one or the other for school taxes. You cannot receive both. In addition to the $10,000 exemption for school taxes, any taxing unit -- including a school district -- can offer an additional exemption of at least $3,000 for taxpayers age 65 or older.
Once you receive an over-65 homestead exemption, you get a tax ceiling for that home on your total school taxes. The school taxes on your home cannot increase as long as you own and live in that home. The tax ceiling is the amount you pay in the year that you qualify for the over-65 homeowner exemption. The school taxes on your home may go below the ceiling, but the school taxes will not be more than the amount of your ceiling. However, your tax ceiling can go up if you improve your home (other than normal repairs or maintenance). For example, if you add a garage or a game room to your home, your tax ceiling can go up. Also, your tax ceiling will change if you move to a new home. When a homeowner who has been receiving the tax ceiling on school taxes dies, the ceiling transfers to the surviving spouse if the survivor is 55 or older and has ownership in the home. The survivor should apply to the appraisal district for the tax ceiling to transfer. The ceiling remains in effect for as long as the spouse lives in the home. A tax ceiling does not expire when the owner conveys the interest in the home to a trust, if the owner-trustor occupies the home. When you no longer live in the home as your permanent residence, you will no longer qualify for the over-65 exemption for the remaining portion of that year. Taxes will be prorated based on the number of days that elapsed after you no longer qualified that home for the exemption to the end of the year.
If you purchase another home, you may qualify for the over-65 exemption when you live in the new home as your principal residence. You may transfer the percentage of school tax paid based on your former home's over-65 school tax ceiling to the new home. For example, if you currently have a tax ceiling of $100, but would pay $400 without the tax ceiling, the percentage of tax paid is 25 percent. If the taxes on your new home are $1,000, the new school tax ceiling would be $250, or 25 percent of $1,000. You may request a certificate from the appraisal district for the former home to take to the appraisal district for your new home.
When homeowners who have been receiving the age-65-or-older exemptions die, the exemptions transfer to their surviving spouses. The surviving spouses must be 55 or older at their spouse's death and must live and have ownership in the home. The survivors should apply to the appraisal district to transfer the exemptions. If your spouse dies in the year of his or her 65th birthday but has not applied for the over-65 exemption, you may apply for the over-65 exemption as the surviving spouse. The exemptions remain in effect for as long as the survivors own and live in the homes.
Homeowners age 65 or older who apply for the exemptions may also pay their home taxes in installments.
If you are a homeowner age 65 or older, you may defer or postpone paying any delinquent property taxes on your home for as long as you own and live in it. To postpone your tax payments, file a "tax deferral affidavit" with your appraisal district. You may suspend any lawsuit by filing an affidavit with the court. The deferral is for all delinquent property taxes of the taxing units that tax your home. A tax deferral only postpones paying your taxes. It doesn't cancel them. Interest is added at the rate of 8 percent a year. Once you no longer own your home or live in it, past taxes and interest become due. Any penalty and interest that was due on the tax bill for the home before the tax deferral will remain on the property and also become due when the tax deferral ends.

Homeowners with disabilities

A person with a disability also may get exemptions. "Disabled" means either (1) you can't engage in gainful work because of physical or mental disability or (2) you are 55 years old and blind and can't engage in your previous work because of your blindness. If you receive disability benefits under the federal Old Age, Survivors, and Disability Insurance Program through the Social Security Administration, you will qualify.

Disability benefits from any other program do not automatically qualify you for this exemption. Contact your appraisal district for assistance on what information you will need. If disabled, you will qualify for a $10,000 exemption for school taxes, in addition to the $15,000 exemption for all homeowners. And, any taxing unit can offer an exemption of at least $3,000 from the home value of taxpayers with disabilities.

Homeowners who are disabled and apply for homestead exemptions also may pay their home taxes in installments.

Are you a disabled veteran or survivor?

You may qualify for a property tax exemption if you are either (1) a veteran who was disabled while serving with the U.S. armed forces or (2) the surviving spouse or child (under 18 years of age and unmarried) of a disabled veteran or of a member of the armed forces who was killed while on active duty. You must be a Texas resident.

You must have documents from either the Veterans' Administration or the branch of the armed forces that show the percentage of your service-related disability. Your disability rating must be at least 10 percent.

If you are a surviving spouse or child, you must have the veteran's disability records. You may need other documents such as proof of marriage or age.

This exemption ranges from $5,000 to $12,000, depending on the extent of the disability. This exemption is not only for a home -- you can apply it to any property you own on January 1. However, you may pick only one property to receive this exemption for the taxing units that tax the property.

The disabled veteran's exemption is different from a disabled homeowner's exemption.

What should new homeowners do?

1. Before you buy a home, you or your mortgage company should get a tax certificate for the home from all taxing units that tax it.

The tax certificate will show if delinquent taxes are owed. You can't get a clear property title until you have paid all delinquent taxes.

2. Your mortgage company may pay property taxes on your home out of an escrow account.

If this is the case, make sure the tax collectors send the original tax bills to the mortgage company. You may want to request a receipt to see if the mortgage company pays the taxes on time and for federal income tax purposes.

3. You should apply to the appraisal district for a residence homestead and any other exemptions.

You must apply to the appraisal district that appraises your home. If your property is valued by more than one appraisal district, you must file the general, disabled, or over-65 homestead exemption in each district office.

4. If you sold your previous home in Texas, make sure it's listed under the new owner's name and address.

5. If your home is new, you should receive a notice of appraised value from the appraisal district in April or May.

Contact the appraisal district if you don't receive this notice.

6. If you no longer qualify for the general, over-65, or disabled homestead exemption, you should notify the appraisal district in writing.

If you fail to notify the appraisal district and don't pay your taxes, your home will have a 50-percent delinquent tax penalty instead of 12 percent, plus interest.

5.Paying Your Taxes

Taxing units usually mail their tax bills in October. The delinquency date is usually February 1. If February 1 is drawing near and you haven't received a tax bill, contact your local tax offices. Find out how much tax you owe and make sure your correct name and address are on record.

Your tax bill includes taxes for more than one taxing unit if some of these taxing units have combined their collection operations.

If your mortgage company pays the property taxes on your home, the mortgage company receives the tax bill.

The tax collector must give you a receipt for your tax payment if you ask for one. Receipts are useful for federal income tax purposes and for ensuring that your mortgage company paid the taxes on your home. In addition, your tax receipt is evidence that you paid the tax if a taxing unit sues you for delinquent taxes.

If you appeal your value to district court, you must pay your taxes -- usually the amount that isn't in dispute before the delinquency date. You may ask the court to excuse you from prepaying your taxes. You must file an oath of "inability to pay" the taxes in question and argue that prepaying the taxes restrains your right to go to court on your protest. The court will hold a hearing and decide the terms or conditions of your payment.

When is the deadline for paying?

In most cases, the deadline for paying property taxes is January 31. Taxes that are unpaid on February 1 are delinquent. Penalty and interest charges are added to the original amount.

However, taxing units must give you at least 21 days to pay after they mail your original bill. If your bill is mailed after January 10, the delinquency date is postponed. You have until the first day of the next month that will provide at least 21 days for paying the bill. So, if the taxing unit mails your tax bill on January 15, your taxes don't become delinquent until March 1. The delinquency date is on the bill.

Most property owners pay their property taxes before the end of the year so they can deduct the payments from their federal income taxes. If you haven't received a tax bill because the ARB is still reviewing a protest on your property, you may make a conditional tax payment. You must pay either last year's taxes on the property or the taxes due on the ARB order, whichever is less. Once the ARB sets a value, the tax collector sends you either a supplemental tax bill or a tax refund.

Check with the tax collection office on payment options that may be available, such as:

Discounts if you pay your taxes early;
Split payment of taxes allowing you to pay half your taxes by November 30 and the remainder by June 30 without any penalty;
Partial payment of your taxes;
Payment by credit card, with a fee of up to 5 percent; and
Escrow agreements for a special year-round account.
Work contract to pay taxes for certain taxpayers doing certain duties.

You may defer some of your homestead taxes if you choose. The taxes deferred are those taxes for any value that exceeds 105 percent of your home's appraised value, plus any new improvements, from the preceding tax year. You must file a deferral application with the appraisal district before the taxes go delinquent, and you must pay the taxes based on 105 percent of the home's value.

If you are 65 or older and have applied for the homestead exemptions for senior citizens, you may pay your current taxes on your home in four installments. You must pay at least one-fourth of your taxes before February 1 (delinquency date). The remaining payments are due before April 1, June 1, and August 1, without any penalty or interest. If you miss an installment payment, you will have a penalty (12 percent) and also interest (at l percent for each month delinquent) added to the installment amount. You must indicate on your first payment that you are paying your home taxes in installments. Installment payments apply to all taxing units on the tax bill.

An over-65 homeowner may defer payment of the taxes.

Homeowners who are disabled and apply for homestead exemptions also may pay their home taxes in installments. See the same steps above that an over-65 homeowner follows to pay in four installments.

Homeowners whose residences are damaged in a disaster and are located in a designated disaster area also may pay their taxes in four installments, in the same months as over-65 or disabled homeowners do.

What if you don't pay your taxes?

The longer you allow your delinquent property taxes to go unpaid, the more expensive and risky it becomes for you.

1. You have penalty and interest charges added to your taxes.

Regular penalty charges may be as high as 12 percent, depending on how long the tax remains unpaid. Interest is charged at the rate of 1 percent per month. There is no maximum amount of interest. Private attorneys hired by taxing units to collect delinquent accounts can charge up to anadditional 15-percent penalty to cover their fees.

2. You get delinquent tax notices.

The tax collector sends you at least one notice that your taxes are delinquent. Tax collectors often send additional notices and warnings.

3. You may have the option to set up an installment plan.

Some tax collectors allow you to pay delinquent taxes in installments for up to 36 months. A tax collector isn't required to offer this option. Before signing an installment agreement, you should know that the law considers your signature an "irrevocable admission" that you owe all the taxes covered by the agreement.

4. You may have a delinquent tax lawsuit.

The tax collector's last resort is taking a delinquent taxpayer to court. Court costs will be added to the delinquent tax bill. Each person who owns taxable property on January 1 is liable for all taxes due on the property for that year. A person who owned taxable property on January 1 can be sued personally for delinquent taxes, even if the property has been sold or transferred since then.

5. You may have problems selling your property.

Each taxing unit holds a tax lien on each item of taxable property. This tax lien gives the courts the power to foreclose on the lien and seize the property, even if its ownership has changed. The property will then be auctioned, and the proceeds used to pay the taxes. As a result of the tax lien, someone who purchases real estate can't get a clear title until all the delinquent taxes owed on the property are paid in full. If you are buying a portion of a larger parcel of land, check the taxes on the larger parcel. You won't be able to clear a tax lien against your part unless taxes on the whole are paid.

6.Closing Payoffs

Often there is a misunderstanding by the seller on how the payoff is calculated. When calculating a payoff, interest must be collected "through" the date the payoff check is received by the lien holder. Keep in mind that interest is paid in arrears. Example: When a seller makes the April payment they are paying the interest for the month of March. If closing in April, interest will be collected from April1 through the date the check is received by the lien holder.

Additionally, most financial institutions set a 2:00 p.m. cut off time for accepting payoffs. Depending on the time of closing and funding the interest may be collected through the next business day to ensure receipt by the lien holder.

There may be instances, especially when paying off an FHA loan, that the lien holder requires the seller to pay the full months interest regardless of the day the payoff check is received. i.e. interest is not prorated.

If you have any questions concerning payoffs, please feel free to call your escrow officer.

7.Tax Exemptions

Certain Taxing Authorities in Texas grant homeowners property tax exemptions on residential property. The most common is the HOMESTEAD EXEMPTION. To qualify for a Homestead Exemption, the homeowner must own and occupy the property as his/her principal residence on or before January 1 of the tax year and apply for the exemption with the County’s Appraisal District. If a Homestead Exemption is granted and the property is sold within the tax year, the exemption will follow to the purchaser for the CURRENT TAX YEAR ONLY – the purchaser must reapply for any subsequent years.

Other exemptions available to the homeowner, if they qualify, that can mean additional tax savings include the OVER 65 and DISABILITY EXEMPTIONS. The homeowner should contact the Appraisal District for qualification information.

A common misconception is that a change of ownership with the County Clerk’s Office (i.e. the Recording of a Deed) will AUTOMATICALLY update the tax records of the Appraisal District. When a property is purchased, THE NEW OWNER MUST CONTACT THE APPRAISAL DISTRICT and complete the necessary forms for ownership change.

How to File for an Exemption on Your Home

1. Get an application form at your local appraisal district office. Fill out only one application. There is a separate application for the disabled veteran's exemption. First American branches also have copies of some of the more popular forms available.

2. Return the form to the appraisal district office after January 1, but no later than April 30. Making false statements on your exemption application is a criminal offense.

3. Provide necessary information. For example, if your home is a mobile home, you must have a copy of the title to the home or a verified copy of the purchase contract.

4. If your property is valued by more than one appraisal district, you must file an application in each appraisal district office. This occurs when your property is located in a taxing unit that is also in a neighboring county. Contact the appraisal district if you aren't sure.

5. You may file for a homestead exemption up to one year after (a) the date you paid the taxes on the home or (b) the date the taxes became delinquent, whichever date is earlier. You will get a new tax bill with a lower amount or a refund if you already paid. Late filing does not apply to the disabled veteran's exemption.

6. If you are 65 this year, you may file for the over-65 exemption up to one year from the date you turned 65.

7. If the chief appraiser asks you for more information, you will have at least 30 days to reply.

8. If the chief appraiser denies or modifies your exemption, he or she must tell you in writing within five days. This notice must explain how you can protest before the appraisal review board.

9. Once you receive a homestead exemption or a disabled veteran's exemption, you don't have to apply again unless the chief appraiser asks you to apply or unless your qualifications change. If you move to a new home, you will have to fill out a new application. If you become disabled on or before January 1, you should file a new application.

10. The chief appraiser may require a new application by sending you a written notice and an application form. If you don't return the new application, you can lose your exemptions.