Buying or selling a home, for most of us, is the largest financial endeavor they will ever undertake. You need to secure the services of a title company to efficiently and accurately handle this complex transaction.
The title company will do title search which means searching the real estate records in the county where that particular piece of property is located. A title search will (1) determine the legal owner of the property; (2) reveal any mortgages, liens, judgments, or unpaid taxes that will have to be satisfied before the property is conveyed; and (3) detail any existing easements, restrictions, or leases that affect the property and possibly the use of the property.
After the title search is completed, if a title insurance policy is to be issued on the property, it will prepare a “Commitment of Title Insurance” to the lender and/or the prospective buyer. The title insurance commitment will set forth all things that need to be completed and any problems that need to be corrected and/or resolved before the purchaser can receive “good title”. The title insurance company will complete all the necessary documents and will undertake to correct any problems. Once these things are done the parties are ready to exchange paperwork and have a closing.
The purpose of the closing is to sign and exchange all the documents necessary to convey title, secure the lender, and deal with collateral issues such as leases, rights-of-way, etc., and to explain in an orderly manner the costs to each party. This is done by preparing a closing statement or what is referred to in the industry as a “HUD 1”. The closing statement will include the mortgage lender’s charges, charges for preparing documents, the title company’s fees, recording costs, and the amount of the payoffs to release any existing mortgages, pro-ration of city and county taxes, real estate commission fees, survey fees, and any other costs associated with the deal.
At closing, the title company will collect the purchase money funds from the buyer and lender as well as the settlement costs from each party. With these funds, the title company then pays all of the expenses of the transaction, payoff any existing mortgages, and pay the seller the net proceeds of sale. All of this is done in accordance with the HUD 1 settlement statement.
After the closing, the title company will record the legal documents (deed, mortgage, assignments, etc.) at the county courthouse and then return the original documents to the correct party. New owners receive their deed which should be stored in a bank lock box or other secure location. The lender receives the original mortgage documents which they hold until the loan is paid in full. Once the loan is paid, the lender will “release” their lien against the property at the courthouse and will forward the original mortgage documents to the home owner. This is when the homeowner can enjoy the “burning the mortgage” ceremony.
Life, Liberty, and the pursuit of… Property?
OK, we just celebrated another Fourth of July this weekend (3rd through 5th). So how well do you know the history of our most important document that protects and preserves our Freedoms? Here is something you may have missed….
Did you know that the original draft of the U.S. Constitution basically said that all men have certain unalienable (natural and legal) rights and that among these are Life, Liberty… and YES… Property!
No kidding. The founders felt that the right to obtain the means to acquire and possess property were so important they were akin to our rights of Life and Liberty itself!
Here is the wording in that original draft. It is found in the first and second article of the Virginia Declaration of Rights adopted unanimously by the Virginia Convention of Delegates on June 12, 1776 as written by George Mason.
That all men are by nature equally free and independent, and have certain inherent rights, of which, when they enter into a state of society, they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.
Interesting, huh? Our founding fathers were so bent on protecting our rights to property that it found itself into at least one aspect of the “pursuit of happiness.” (And Is this not an essential part of the American Dream?) Indeed John Locke, among others, upon whom the concept of happiness was based in our Constitution, believed strongly that one aspect of happiness IS the right to pursue the acquiring of property and the free use of it.
Well, here is “the rest of the story” in a nutshell…
Happiness is a huge issue. And both Benjamin Franklin and Thomas Jefferson (who drafted the Constitution) felt that, while property was an important aspect of our enjoyments, there are numerous components that secure and promote our happiness. So Jefferson down played the property rights and instead broadened the language to include more than that. In fact, Jefferson believed that happiness is not so much what we have or get but our conscience and awareness of others… what we give, not get. [see Life, liberty and the pursuit of happiness from Wikipedia, the free encyclopedia: http://en.wikipedia.org/wiki/Life,_liberty_and_the_pursuit_of_happiness]
The United States Declaration of Independence, which was primarily drafted by Jefferson, was adopted by the Second Continental Congress on July 4, 1776. The text of the second section of the Declaration of Independence reads:
We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
From now on when you hear the phrase “Life, Liberty and the pursuit of Happiness”, you will better understand how huge the concept of “pursuit of Happiness” is… how property is part of it… but so is our general civility and love for each other and the “right” to pursue our dreams, our happiness by a government that not only does not interfere with these rights but helps to protect and preserve them.
PS – I encourage you to read up more on this topic in Wikipedia: http://en.wikipedia.org/wiki/Life,_liberty_and_the_pursuit_of_happiness
