Should You Use a Title Company

Should You Use A Title Company To Purchase a Mortgage?
When you fund a loan or purchase a promissory note, your transaction should always be done through an "escrow".

Escrow is a specific process in which a title transfer and a funds transfer take place through a neutral third party during a real estate transaction. An escrow is considered opened when money, documents, and written instructions (escrow instructions) for the transaction are delivered by the lender and borrower to a title agent who acts as the third party.

The company providing escrow (Title Company) acts as the middleman in the transaction, and the title agent is the one who will process the transaction in accordance to the initial escrow instructions that was agreed to by the lender and the borrower.

The instructions provided by escrow determine the conditions that need to be met or waived before the title agent can take action and disburse your money to either the note holder or the borrower. Some of these conditions include:

  1. Delinquent taxes must be paid
  2. Certain liens must be removed
  3. Selection of title coverage
  4. Completion and handing over of the trust deed or promissory note
  5. Completion and handing over of the endorsement or assignment of the promissory note

 Escrow Instructions
All conditions regarding the transfer need to be in writing. Moreover, all transaction details, including the agreement made by the seller and buyer, need to be written in the escrow instructions so that they are clearly understood by all parties involved.

The following is a list of requirements for the escrow instructions:

  1. Name of the escrow agent or title agent, third party or depository
  2. Names of the buyer and seller as well as their proper vesting (e.g., joint partnership, corporation, individual person, etc.)
  3. A legal description of the property that is to be transferred
  4. The price at which the property was purchased
  5. Set conditions in regards to transfer and payment
  6. Distribution of cost, insurance costs, taxes and assessment
  7. The signature of both the seller and buyer

 After the instructions have been completed, then it is important for you to read the preliminary title report carefully to make sure that you understand everything and nothing has been overlooked or missing. You should also check and see that the mortgages and notes as well as the amount of indebtedness are all in proper order. For example, if you have the first mortgage, then there should be no other lien before yours.

You should also make sure to ask questions if you do not understand certain wordings or restrictions. If this happens, you should ask the title agent or your mortgage broker to produce copies of the listed documents in the title report. As an investor, you should never feel embarrassed to ask questions. Remember, by asking questions you learn all the facts necessary for successful trust deed investing.

Closing Escrow
Once you have completed all of the necessary instructions and requirements for escrow, and it begins to take its normal course, you are now ready to complete the escrow which is often referred to as "close of escrow," "closing" or "settlement."

Escrow "closes" when every condition of the escrow instructions have been waived or met, the instruments have been recorded, and the funds have been disbursed.

In other words, when everything is ready, and the documents have been appropriately signed, the escrow officer informs the title company to record the mortgage and then deliver all the executed loan documents to the lender. As soon as the lender is in possession of these documents, loan proceeds are released to the title agent. The title agent ensures that the exchange of documents and funds runs smoothly.

You should receive a closing statement describing to whom and how the funds and the documents were distributed.

For further information please contact: Jorge Garcia-Pulido, President/CEO 305-796-4799

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