Buying a home can be a very exciting process for first-time buyers. You’ve looked high and low and finally have found the property that just screams “Home”. So what happens next? For many, the steps that go into purchasing their home are somewhat of an unknown. They know they’ve made their choice and they need to sign on the dotted line, but what really goes into a closing? I decided to sit down with Real Estate Attorney Bridgette Bonet to demystify the in and outs of closings and the importance of titles.
Hello Bridgette. Thank you for taking the time to have this interview with me. I really wanted to talk to you about the importance of closings and titles. Why is it so important?
In general purchasing a home is a huge purchase. For some people it will be the biggest they will ever make and it’s surprising how many people aren’t really aware of the process because you’re probably not going to buy that many properties in your lifetime. Maybe they buy one, maybe they buy two or maybe they inherit a property so they’re not really familiar with the closing process. But it is very important to understand it to make sure that whatever you are purchasing is not going to be left with any encumbrances or something that’s going to come back later to affect you. That’s where title insurance comes along.
So what exactly is title insurance?
So a lot of people don’t really know what title insurance is. A lot of people when they come to us and we assist them with their closing they think when we’re speaking about insurance that we’re talking about home owner’s insurance. They’ll say, “Well, I need to get home owner’s insurance and flood insurance.” Well, title insurance is going to protect you just as much as that other insurance will because it’s going to protect you, its going to protect the title which is what vests the ownership of the property into you. So for example, if you know three, four five years, even ten years, from the time you purchased your home or your condo unit let’s say somebody comes out of the woodworks and says, “Well, I have an interest in that property because of this will,” or what have you, you’re going to have title insurance that protects your interest in that property.
So it would seem unnecessary to ask, but does that happen?
Yeah, it really happens. A title company is tasked with the responsibility of finding everything that’s recorded against that property and making sure that they’re conveying a clean title to you, but you know sometimes people make mistakes. Sometimes things are overlooked and unfortunately there’s human error and that title insurance is going to protect you. Another thing that assists homeowners in that respect is that the title insurance premiums are actually promulgated by the state of Florida. So it’s something that the state of Florida finds so important that they didn’t want people to be taken advantage of, in the sense that they wouldn’t know how much premium should be. So the state of Florida has actually promulgated the rate based on the price of the purchase. So whatever title company you choose they will always be the same amount of title insurance premium to pay and it is always based upon your purchase price. So basically you buy a piece of property for $250,000 this is what your premium is going to be.
Has this been something that has always been in place?
This actually came about after the last time the market was high before the market crashed. Title companies were charging astronomical prices for title insurance. The state felt that was something that needed to be regulated because it is very important and it protects your interest in your property. At the end of the day it’s something you want to protect because it is the biggest investment you’ll probably make in your life.
What is one of the biggest issues people come up against? We talked about if someone comes out of the woodworks with a claim to the property or an inheritance or as you just finished speaking about, if there’s an outstanding balance. Are those the biggest or most common issues they run into?
Yes. Those two and maybe in some cases a mortgage may be missed that should have been satisfied. It also comes up with respect to let’s say there’s a condominium association that has a lien interest. Sometimes the title company may miss an estoppel whereas you know let’s say theirs a condo there may be a master community as well they don’t request an estoppel for both of those communities that lien or an amount that’s due to that association would remain on the property. So if you close, that’s a big deal if there’s a large balance due, but you would have recourse against your title insurance to pay that claim. So it’s really just protecting things that maybe shouldn’t come up, but again there’s always a rainy day aspect. That’s why we have insurance.
When it comes to thinking about closing and looking at titles, what are the things people should really be looking at and thinking about?
Well they definitely want to have their title company, which is standard, do a lien search on the property so that they understand if there’s any outstanding violations, if there’s any outstanding water bill. Sometimes even animal control will have an outstanding violation. If there are any government liens on the property, let’s say the city of Miami or whatever municipality is in the area you’re definitely going to want to look at that lien search and they’re typically tied to some sort of monetary fine. Those stay with the property, so if they’re not taken care of at closing they’re going to be an issue.
Another thing is you’re going to have a title search come back which is what creates the title commitment, which turns into then your title insurance policy. You’re going to want a title company that discloses everything that’s on there because there may be easements that run through your property, sometimes FP&L and that’s very standard, but you may want to be aware of that. Also to respect with the different condominium associations. You know some properties, especially here in Florida, if you’re buying in Kendall, in Homestead or Pembroke Pines or one of those areas that have a lot of gated communities you may be buying in an area that has tiered associations. So you may know that I’m buying in such and such community, but you may not understand that that’s also part of a larger community that you have to pay assessments to as well. That will all come up on your title search because all of the recorded documents, all of those covenants of those associations will appear. So there are some associations that have 3 different levels. They’ll have a condo association, a neighborhood association and a master association. So it’s definitely something you want to be aware of because you purchase the property and then you realize you, “Oh, I have to pay x amount of extra money to a home owners association I didn’t even know about.”
So what is your biggest tip for people when they’re going into the process?
Ask questions, that’s one thing. You know whenever I send out my title request and my title search comes back I send it to all the parties and I ask them to ask questions. So, do you have any questions about what came up here? You know, do you want to go through it a little bit more carefully. Definitely people are a little bit deer in the headlights in some cases where they’re kind of confused, so definitely ask questions. I try to walk them through the process as much as possible and give them as much information as possible, but ask questions. And not just the money questions because everyone’s always concerned with the fees and you know how much this costs and yes at the end of the day that’s important, but the other things are important as well.
So do people come to you that are in the process of closing on their own?
Well typically, the closing agent is chosen within the purchase and sale agreement. We typically act as the escrow agent, which is already in the purchase and sale agreement so it’s kind of worked out beforehand and it’s typically either a referral by the realtors involved or by the mortgage broker or the bank. In standard practice, although you could negotiate otherwise, the buyer chooses the title company. If you pick a good realtor and you have a good closing agent then you should be in good hands.
So then it’s safe to say that people should definitely invest their time into research in order find a good realtor and closing agent.
What is something that kind of pops up in this process that you see is something that people don’t tend to think about and are then surprised by when it pops up?
Definitely the costs involved. Typically you’re taking out a mortgage, so you want to have a good relationship with your broker or with your bank rep so that you understand what their costs involve. And then get an idea, we can always ask for a preliminary closing statement that gives the costs for the title insurance as well. So you just have a broad picture as to what at the end of the day the closing costs in total, including the lenders and those of the title insurance and the title company, are going to be. But, if you have a good realtor typically they’re going to ask for that and a good bank rep will ask for that as well just so that everyone is on the same page. It’s a relationship between the three parties: the realtor, the closing agent and the broker or bank rep to kind of push things along in a positive manner and keep the buyer and the seller fully engaged at all points. It’s really a lot of communication making sure that everyone is comfortable with where things are at, how things are going and that we’re all going to get to the finish line in a positive way.
So I can see how the money thing would be at the top of people’s concerns.
The money is an important part at the end of the day because that’s what they’re going to have to come out of pocket for…
What are other things that pop up aside from the money?
Well the liens and the violations. Also you want to be aware of permitting. Permitting is not covered by title insurance, so you want to make sure that you know if there’s any open permits and figure out a way to get those closed if there are, prior to purchasing or selling the property. Permits are very important.
What are other services that you provide for clients outside of this process?
We can also assist the seller. In some cases, the seller is not represented by an attorney and we can assist them. The buyer has a lot more responsibility with respect to getting the deal closed, but the seller does as well. The seller has to have their deed executed. The seller has to have certain affidavits and warranties that are given over to the buyer. If they have an outstanding mortgage they also need to get that satisfied. So the seller does need some assistance, so in some cases we can assist the seller as well in getting what they need done to convey the property.
What’s something that you want people to know about when it comes to working with you?
For us, we’re very proud of the fact that our title company is attorney owned and operated. We’re regulated by the bar, which means we’re held to a bit of a higher standard with respect to the way that we have to practice. So communication is very important to us. Nobody likes to be shuffled around, so we’re very proud of the fact that our attorneys are involved from beginning to end on each of our deals and you’ll have direct contact with an attorney with respect to your closing.
So as you stated communication is so important throughout this process. What happens if for example someone is working with a company and that communication is lacking? Are they able to look for someone else to work with?
Once you get to a certain stage of a deal then there’s costs involved. You’re already incurring costs that are due to that particular title company and it may be a bit difficult to transfer over once those fees have been incurred. So if you were very serious about that then you would need to know what your cost liability is at that point and see if it would make sense.
If you’re interested in hiring Bridgette or just to ask her any further questions, she can be contacted at firstname.lastname@example.org