© 2008 Dearborn Real Estate Education CHAPTER 4 HOW TO READ TITLE WORK LIKE A PROFESSIONAL

© 2008 Dearborn Real Estate Education LEARNING OBJECTIVES define the most common title encumbrances and explain in plain English what they mean distinguish what’s acceptable on title work from what’s not acceptable

© 2008 Dearborn Real Estate Education LEARNING OBJECTIVES know how to review title work to assure it meets a customer’s needs recognize red flag areas that will likely delay closing unless given special attention.

© 2008 Dearborn Real Estate Education KEY TERMS Check off any terms you do NOT recognize

© 2008 Dearborn Real Estate Education A title commitment is the document that shows all title research done on a property through a particular date. It is used to prepare closing documents.

© 2008 Dearborn Real Estate Education Understanding the layout of a title commitment. Cover Schedule A Schedule B

© 2008 Dearborn Real Estate Education Cover sheet or jacket Standard language pertaining to terms of the policy

© 2008 Dearborn Real Estate Education Schedule A Identifies the property; the insured; policy amounts; how Seller holds title; precise legal description.

© 2008 Dearborn Real Estate Education Schedule B The “meat” of the title and key to closing. Where to concentrate your efforts.

© 2008 Dearborn Real Estate Education Title Exceptions found on (virtually) all properties

© 2008 Dearborn Real Estate Education Real estate taxes are handled at closing per instructions on the purchase Agreement.

© 2008 Dearborn Real Estate Education Assessments $$$ levied and pending Charges for the improvement of property They are handled per the Purchase Agreement

© 2008 Dearborn Real Estate Education Easements authorized uses of land for a specific purpose.

© 2008 Dearborn Real Estate Education U&D Easements are most common. Consumers should be aware of their location and size. Types of easements

© 2008 Dearborn Real Estate Education Encroachments Illegal overlap onto another persons property

© 2008 Dearborn Real Estate Education Blanket easements cover a large area of land without being specifically located. ? ?

© 2008 Dearborn Real Estate Education Common Driveway Easements occur when two adjacent parcels share access.

© 2008 Dearborn Real Estate Education Wetlands and Environmental Easements require the owner NOT to change the habitat.

© 2008 Dearborn Real Estate Education Mortgages/Deeds of Trust hold the property as security for a loan.

© 2008 Dearborn Real Estate Education Consumers often misunderstand Home Equity Lines of Credit are 2 nd Mortgages that need to be paid off and closed out at closing Beware

© 2008 Dearborn Real Estate Education Covenants, conditions and restrictions (CC&R’s) commonly cover an entire subdivision

© 2008 Dearborn Real Estate Education Covenants, conditions and restrictions (CC&R’s) can contain a forfeiture provision

© 2008 Dearborn Real Estate Education Common Interest Communities occur when owners share such things as access, party walls, parking and utilities. C,C&R’s cover important issues

© 2008 Dearborn Real Estate Education Covenants, Conditions and Restrictions Be sure the buyer reads these before the closing!

© 2008 Dearborn Real Estate Education UNDERSTANDING AND REMOVING LESS COMMON TITLE ISSUES

© 2008 Dearborn Real Estate Education Understand the language so you can resolve the problem. Encumbrance any claim on title. Lien an encumbrance removable with $$$$.

© 2008 Dearborn Real Estate Education LIEN$ are classified as $pecific liens or general lien$

© 2008 Dearborn Real Estate Education Specific liens attach to specific real estate Mortgage Mechanic’s Lien Real Estate Taxes

© 2008 Dearborn Real Estate Education General liens attach to people.. examples of general liens State Tax Liens Child Support Liens Judgments State Tax Liens

© 2008 Dearborn Real Estate Education and generally to all the people own...including real estate. General Lien$ ex: STL,FTL, JU

© 2008 Dearborn Real Estate Education An Attorney’s Lien is filed for services rendered by an attorney.

© 2008 Dearborn Real Estate Education Financing Statement a lien filed on personal property If selling a mansion, what personal property might be included? Might there be a financing statement on that property?

© 2008 Dearborn Real Estate Education Mechanic’s liens occur when material or labor are supplied to build, renovate or repair property. How often do people make repairs to their property before selling?

© 2008 Dearborn Real Estate Education Judgment liens are General Liens obtained by court order

© 2008 Dearborn Real Estate Education Releasing Liens from Land A Satisfaction will completely remove the Lien A Partial Release of Lien will lower the amount of the debt

© 2008 Dearborn Real Estate Education Releasing Liens From Land A Partial Release of Land releases a parcel, but leaves the unpaid balance of the lien intact to attach to other property.

© 2008 Dearborn Real Estate Education Use of Affidavits Affidavits are often used to clear title particularly as Affidavits of Non- identity when someone has a common name

© 2008 Dearborn Real Estate Education State Tax Liens enforce government rights for non payment of state taxes

© 2008 Dearborn Real Estate Education Federal Tax Liens

© 2008 Dearborn Real Estate Education Child Support Liens general liens for non payment of child support.

© 2008 Dearborn Real Estate Education Federal District Court Judgments tend to be large national lawsuits with large awards

© 2008 Dearborn Real Estate Education RED FLAG AREAS FOR CLOSING

© 2008 Dearborn Real Estate Education A way to temporarily suspend and possibly prevent debt collection for those debts listed at the time of the bankruptcy petition. Bankruptcy

© 2008 Dearborn Real Estate Education Cloud on Title a generic name for any item that might make title unmarketable.

© 2008 Dearborn Real Estate Education Your Seller claims property as his Principle Residence and says it is therefore exempt from foreclosure of a large judgment. What do you do?

© 2008 Dearborn Real Estate Education Eminent domain The government’s taking of land for the public good and with just compensation.

© 2008 Dearborn Real Estate Education Judgments in favor of U.S. Liens in favor of the U.S. Government or any U.S. Agency are good for 20 years.

© 2008 Dearborn Real Estate Education Pollution Control Liens liens by any government agency for land clean-up

© 2008 Dearborn Real Estate Education Decrees of Dissolution (Divorces) create special title issues: Watch for: transfer of title to one party liens in favor of ex- spouse name changes special stipulations

© 2008 Dearborn Real Estate Education Notice of Lis Pendens any legal document stating a law suit has been commenced on the property.

© 2008 Dearborn Real Estate Education Impact Fees Used by Local Government on new developments to finance roads, sewers, water and other needed infrastructure. Can be paid by Builder/ Developer or Buyer as negotiated in Purchase agreement. Fees can be significant!

© 2008 Dearborn Real Estate Education REVIEW QUESTIONS