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What Is Title Insurance?

Title Insurance companies provide insurance for buyers and mortgage lenders against several kinds of title risks that can affect real estate trades including survey errors, legal description errors, negligence, forgery, liens and other encumbrances. Many lawyers now prefer their home buyer clients take out title insurance even if there is a recent survey.

While title insurance represents one more cost burden for closing, there are some cost savings enjoyed because title insurance was purchased. For example you would not need to pay for these otherwise required expenses:

  • Zoning compliance certificate
  • Tax certificate
  • Hydro, water and gas certificates
  • Law Society levy

This cost savings can amount to between one half to two thirds of the title insurance cost, depending on the title insurance provider and the area involved. In 2003, title insurance cost is about $300.

For information about local Title Insurance companies in your area and for an update on the cost or features contact your local real estate agent or lawyer.

Posted under Buyer, First Time Buyers, Real Estate Terms

More Common Definitions

Abstract of Title: A condensed historical summary of the ownership of a piece of property showing all recorded documents that affect the land including transfers of ownership and any right that persons other than the owner might have in the land.
Abstract Property: All property which has not been brought into the registered (Torrens) land system, and of which evidence of ownership is determined by examining an Abstract of Title. Evidence of ownership of this type of property is maintained in the office of the County Recorder for the county where the property is located.
Addenda: Separate writings that become part of the purchase agreement.
Appraisal: The estimate of value made by an impartial expert.
Arbitration: The process in which a dispute is decided by an arbitrator, whose decision is binding.
Assessment: Costs charged against property for public improvements that benefit the property.
Assumable: A mortgage the responsibility of payment for which can be taken on by a buyer.
Bill of Sale: A written agreement by which one person transfers his or her personal property to another person.
Broker: A person or entity licensed to represent buyers or sellers in the purchase or sale of real estate.
Cancellation of Purchase Agreement: Can be accomplished by a written agreement between all parties to the purchase agreement, or by following the requirements of Minnesota Statute Section 559.21 when the buyer has breached the terms of the purchase agreement.
Certificate of Title: A certificate maintained by a county Registrar of Titles that shows ownership of non-abstract real property.
Closing: The meeting for the sale of property at which the transfer is finalized.
Closing statement: An accounting of funds to the buyer and the seller at closing. (Also called a settlement statement or “HUD-1”).
Conciliation Court: Small claims court where parties can have claims valued at $7,500 or less decided quickly and inexpensively.
Condominium: Individual ownership of separate parts of a building plus joint ownership of the common elements.
Construction loan: A loan where money is advanced as construction takes place.
Contingency: A future event or action which must occur before the purchase agreement is valid.
Contract: A legally enforceable agreement to do or not to do a certain thing.
Contract for Deed: A contract that allows a buyer to take possession of property in exchange for monthly payments until the balance is paid off. The seller keeps legal title to the property until the final payment is made, at which time the seller conveys the land to the buyer.
Conventional loan: Real estate loans that are not insured by the FHA or guaranteed by the VA.
Counter offer: An offer made in response to an offer.
Deferred Special Assessment: Special assessment which has been levied but collection of which has been delayed.
District Court: The court of general jurisdiction in Minnesota.
Dual Agency: Representation of two or more parties in a transaction by the same real estate agent or broker.
Earnest Money: Money paid by a buyer to show the buyer’s good faith in making an offer to purchase property.
FSBO: For sale by owner (pronounced “fizbo”).
Homestead Tax: Property taxes paid by property owners who live on the property.
Levied Special Assessments: Assessments charged against the property following a hearing by the assessing authority and a determination of the dollar amount to be charged each property.
Listing Agreement: A written agreement allowing a real estate agent to sell a homeowner’s property.
Litigation: A lawsuit.
Loan Origination Fee: The fee a lender charges for processing a mortgage application.
Maintenance Fees: Fees paid by a property owner to the owner’s association for upkeep of the common elements.
Mortgage: The pledge of real estate as collateral in exchange for a loan.
Mortgage Discount Points: Prepaid interest on a loan; one mortgage discount point equals 1% of the total mortgage loan.
Note: A written promise to repay a debt.
Owner’s Duplicate Certificate of Title: A duplicate copy of the original Certificate of Title issued by the County Registrar of Titles to the owner of property under the Torrens System.
Pending Special Assessment: An assessment existing after an assessing authority’s order for an improvement to be made; the exact amount of this assessment is unknown (“pending”).
Purchase Agreement: A contract for the purchase and sale of real estate.
Quit Claim Deed: A deed that transfers to the buyer the rights of the seller in the land without promising that the seller has full title or that there are no liens against the land.
Special Assessment: Costs charged against property for public improvements that benefit the property.
Survey: A mapping of land boundaries and improvements and easements on real property.
Title Insurance: An insurance policy purchased for protection against most title defects.
Title Opinion: A lawyer’s written statement of the current condition of title for a parcel of land.
Torrens System: A state-sponsored method of registering and maintaining land titles. Record of ownership of this type of property is maintained in the office of the Registrar of Titles for the county where the property is located.
Warranty Deed: A deed in which the seller promises that the title to the land is good and complete.
Posted under Real Estate Terms

As Is Condition

Words in a contract intended to signify that no guarantees whatsoever are given regarding the subject property and that it is being purchased exactly as it is found. An “As Is” indicator is intended to be a disclaimer of warranties or representations. The recent trend in the courts to favor consumers tends to prevent sellers from using ” As Is ” wording in a contract to shield themselves from possible fraud charges brought by neglecting to disclose material defects in the property.

Even though an “As Is” clause may give some protection to the seller from unknown defects, the clause is inoperative when the seller actively misrepresents the condition of the property. It does not shield the seller who fails to repair a readily observable defect, basically saying “You take it as you see it.” The idea is that the buyer takes the visible condition into account when making an offer and setting the purchase price. Therefore, if a buyer should be expected to discover a defect upon a reasonable inspection, the buyer will be charged with notice; otherwise, the broker and/or seller have the affirmative duty to inform the buyer of the defect, preferably in writing.

Sellers can protect themselves by being specific in the contract, for example, about recurring plumbing problems, a cracked foundation, leaky roof, den built without a building permit, all in “As-Is” condition. If for example, the roof defect was not obvious and the buyer did not know of this material defect, but the seller did know, then a general “As-Is” clause is probably worthless.

Many contracts contain standard language that must be evaluated in light of an “As-Is” clause. For example, the seller may still be required to provide a termite report even though the property is sold “As- Is”. In such a case, the seller may want to affirmatively delete the standard termite clause. Also, “As Is” does not normally cover title encroachment matters unless specifically noted.

Even where an “As-Is” clause can protect a seller, many courts hold that a broker cannot use the “As-Is” clause to avoid liability for misrepresentation, because the broker is not a party to the contract in which the “As-Is” clause is contained.

In appraisals, “As Is” is an indication that the value estimate is made with the property in its current condition, which may not be the highest and best use or may include needed repairs.

Posted under Real Estate Terms

Real Estate Agent Vs Real Estate Broker

Real Estate Agent – A licensed real estate salesperson. Real estate agents work under the supervision of a real estate broker and are licensed by the state/province to perform real estate services for a fee.

Real Estate Broker – A real estate professional licensed by the state/province to sell real estate, and to supervise other licensees, both salespersons and brokers. The principal broker of a real estate business is generally responsible for the acts of the licensees under him or her. The real estate broker’s license is often more difficult to obtain than a salesperson’s license, sometimes entailing a minimum work experience period and a more extensive test.

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Title – (1) the right to ownership of land or personal property; (2) the rightful means under which one claims ownership or a possessory interest in land; the union of all elements of ownership; (3) the written evidence of ownership.

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Power Of Sale

Power Of Sale – The contractual right of a lien holder to sell property serving as collateral for a loan or other obligation without judicial action in the event of a default.

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Power Of Attorney

Power Of Attorney – a written instrument whereby a principal grants certain powers to an agent (the attorney-in-fact) to act on the principal’s behalf in certain situations for a specific period of time. The person so named need not be a licensed attorney, but does bear a fiduciary duty to the principal.

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Foreclosure – a legal process in which, against the wishes of the owner, real property is sold to satisfy a public or private debt for which the real property has been pledged as security.

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Amortization Term

Amortization Term – the time required to pay off a loan with specific periodic payments. For example, many home mortgage loans have an amortization term of 30 years.

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Amendment – a modification of an agreement that does not substantially alter the essence of the agreement.

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Assessment – (1) same as assessed value; (2) the actual amount of the property tax; (3) a special charge to a property owner by either a taxing agency or a homeowners’ association.

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Buyer’s market

Buyer’s market – a casual term indicating a market in which the supply of property exceeds the supply of willing and able buyers.

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Sales Contract

Sales Contract – a written or oral agreement that sets forth the terms of a transaction agreed between buyer and seller. A sales contract involving the sale of real property must generally be in writing to be enforceable.

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Present Value

Present Value – a method of arriving at an appropriate price or value today for the right to receive either a level cash flow over time (present value of annuity), or a lump sum later in time (present value of 1). The essence of the concept is that money received today is generally preferred over money received later. The quantification of that preference is what determines the prevailing rate of interest at given time.

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