For Sale by Myself; or How I Learned to Love Title Insurance
It’s time for a change, a big one. A different house; a new place to lay your head. Every dollar counts. You’re an intelligent, independent individual, so taking the initiative to sell your home yourself makes sense. Taking charge of the sale saves you from paying a real estate agent’s commission. Though putting your property up as For Sale by Owner (or FSBO for short) cuts down the cost of your home’s sale, you may miss the guidance the real estate agents can provide.
Thankfully, there’s a guide in your title company.
Title Insurance: What is it?
There are two types of title insurance: the owner’s policy and the lender’s policy.
When there is a mortgage involved, the lending bank requires that a lender policy be acquired before it will issue a loan. This policy protects the status of the mortgage as the “first lien” on the property, meaning other debt obligations can’t take priority. Without it, a lender won’t approve the purchaser’s mortgage.
The owner’s policy is a one-time purchase that protects the homeowner from issues with title for as long as they own the property. It is often customary for the seller to pay for the owner’s policy, although practices vary from state to state. If the seller pays for it, they have the right to choose the title company.
There are many types of title defects, such as improper recording of legal documents, liens arising from unpaid debts, fraudulent activities, forgeries, undisclosed heirs or spouses, or problems with the deed itself. Deeds created by minors or executed by expired power of attorney are two such potential deed problems, although there are many more. Liens are debt claims attached to property. They act as a security interest on the property, requiring repayment of the debt. There are consensual liens, statutory liens, and judgement liens. Want to further understand liens?
Although it’s not required, it is recommended that the buyer obtain an owner’s policy. Without an owner’s policy, the buyer is not protected against claims on the property that can complicate the home’s sale later down the road. Depending on the state, the seller may take on responsibility for purchasing the policy for the buyer. As the seller, if you pay for the owner’s policy, you also get to choose the title insurance company.
The title company you choose will have one primary duty: preparing an abstract about the history of the property. This means a title search, researching the property in public records and searching for claims on the property such as liens from delinquent taxes or contractor fees. The amount of the property’s history to be searched varies depending on the state but can stretch anywhere from 30 to 70 years.
After the search, a purchase escrow specialist will then determine how to clear any existing claims so the transaction can move forward. They ensure relevant documents are handled, signed, delivered and recorded correctly and in a timely manner. A FSBO seller is taking on responsibility for much of the transaction. That’s why choosing the right title company is important. You need a title company that is knowledgeable and competent when it comes to clearing title.
When deciding which title company to use, it is also important to choose one that offers the services that you need. Title Source is experienced with FSBO transactions and an expert in partnering with homeowners in many states across the country. In many states, they offer closing services where a licensed agent, attorney, and/or signing agent (depending on the state’s requirements), will be scheduled to meet with the buyer and seller to have the necessary documents signed to finalize the transaction. Your Title Source agent will meet you anywhere, at any time – giving you the flexibility you need in your day. Through Title Source’s subsidiary companies like TSI Appraisal, appraisal services are also available. They partner with sellers through each transaction, guiding them through the process step-by-step and staying in touch – even over the weekends if needed.
“We are not your traditional 9 to 5 company,” Mason said.
Although FSBO transactions can seem tricky, there are homeowners that make the decision to “DIY,” or do-it-yourself, every day. If there are any concerns that are specific to your property and selling your home by owner, it is always a good idea to consult with a real estate attorney.
For more information about how Title Source can assist you with a For Sale by Owner transaction, contact them at Purchase@titlesource.com.
Sam Curtis, Marketing Intern