Helpful Information for Buyers,
Sellers and Agents.
Frequently Asked Questions
WHAT IS TITLE INSURANCE?
Title Insurance: An owner’s title insurance policy is provided to the new buyer at the time of purchase. If necessary, the owner’s title insurance policy protects the new owner/buyer (monetarily and with legal defense) if a title-related loss or claim presents itself after closing. The cost is a one-time fee based on the sales price and standardized across the entire state of Texas. Buyer and seller negotiate within the sales contract who will pay that one-time cost at closing. Title Insurance: An owner’s title insurance policy is provided to the new buyer at the time of purchase. If necessary, the owner’s title insurance policy protects the new owner/buyer (monetarily and with legal defense) if a title-related loss or claim presents itself after closing. The cost is a one-time fee based on the sales price and standardized across the entire state of Texas. Buyer and seller negotiate within the sales contract who will pay that one-time cost at closing.
Possible claims include:
- Errors or omissions in deeds
- Mistakes in examining records (ex: missed easement or deed restriction)
- Claims by a prior owner’s divorced spouse
- Undisclosed or unknown heirs from a deceased’s estate
- Delinquent property taxes from a prior owner
Title Commitment: The Commitment to Insure Title, or “title commitment,” is a preliminary disclosure from the title company that describes the proposed terms of the title insurance policy, based on the contract and the title research we receive.
Explanation of a Title Commitment:
Schedule A: Description of Insureds, Vested Owners and Legal Description
Schedule B: Exceptions to title that will remain post closing (deed restrictions, easements, plat issues.
Schedule C: Exceptions that are generally satisfied/cured at closing (seller’s mortgage, IRS liens, divorce issues, etc.)
Schedule D: Disclosures related to title company, regulatory info.
There are two types of Texas title insurance policies – an owner’s policy and a lender’s (mortgagee policy). An owner’s policy protects the buyer/insured by paying claims and legal fees should an insured title issue arise. Owner’s title insurance is purchased for a one-time fee at the original purchase and lasts as long as the buyer or its heirs have an interest in the property. When obtaining a new loan or refinancing an existing loan the lender will always require the borrower to purchase a lender’s policy. A lender’s policy only protects the lender’s interest in the property.
Helpful Tips: As a buyer make sure to review the title commitment (especially Schedule B) and the restrictions that are on record. Why? For one example: some deed restrictions mandate that houses within the neighborhood cannot be more than one story; if you want to add a second story, this could make or break the deal. Also, a buyer should make sure to contact the city within the option period to confirm that any desired improvements will be allowed. Municipal restrictions and recorded restrictions do not always match.
WHAT ABOUT A SURVEY?
The need for a new survey is negotiated within the standard sales contract. It is negotiable whether seller or buyer are responsible for the cost if a new survey is needed. Often, the sellers are able to provide an existing survey that is also acceptable to the lender (if applicable) and title company.
Helpful Tips: If you know before the contract is finalized that the seller is not able to provide a new survey, select the new survey option from the beginning (paragraph 6 of the TREC 1-4 Family Resale Contract). In the contract, be sure to allow enough time after option expires and before the new survey due date. Survey turnaround time is typically between 3 to 7 days.
Remember: If the seller is responsible for providing an existing survey and notarized survey affidavit (paragraph 6(C)(1) in TREC 1-4 Family Resale Contract) and those are not provided to buyer by the time specified in the contract, then the seller is required to pay for a new survey. If the seller provides survey and affidavit within the time prescribed, but it is not acceptable to title and/or lender, then it would follow terms of contract as to who is responsible for the new survey needed (buyer or seller as negotiated).
Paragraph 6(C)(1): If seller fails to furnish the existing survey or affidavit within the time prescribed, Buyer shall obtain a new survey at Seller’s expense no later than 3 days prior to the Closing Date.
Another tip when representing the seller: the survey affidavit does have to be notarized, but when the seller is a married couple either spouse can execute it (LegacyTexas Title do not require both to sign). We do have a notary available at LegacyTexas Title.
Survey Amendment: The survey amendment deletion coverage/shortages in area amendment is 5% of the Owner Title Policy Premium. It insures the boundaries of your property (Example: Survey shows lot to be 70 feet but the lot is actually 60 feet). It also insures any loss due to encroaching improvements which are not shown on the survey (Example: Garage on neighbor’s yard is shown on neighbor’s yard on the survey but the Garage is actually encroaching 10 feet onto our property).
Additional Coverage – T19.1 Coverage: Additional Survey Coverage (Is also 5% of the Owner Title Policy Premium). Protects against known encroachments (Example: home built over the 35’ building line).
WHAT ARE KEY PROPERTY TAX DATES?
January 1: Ownership is determined for homestead exemption status & property assessed values are established as of this date.
February: Exemption application sent to owners that bought in prior year.
April 15: Assessed value notices available (not mailed unless value increased).
May 15: Assessed value protest deadline.
October: Tax bills sent out to owner of record in early October.
December 31: End of IRS tax year for payment of property taxes.
January 31: Deadline to pay property taxes (for prior year’s taxes).
February 1: Property taxes become delinquent.
WHAT IS A HOMESTEAD EXEMPTION?
- Homestead exemption eligibility based on the owner and use as of Jan 1.
- Homestead Exemption can be applied for in January (deadline to make sure it is on the upcoming bill to apply is April 30th)
- Homestead exemption status typically remains for the current year even if sold.
- Homestead exemption may not be transferred.
- Exemptions only eligible on one home (no second homes).
- Buyers will apply for their homestead exemption in January. It is a free, online application available through the appraisal district.
- For Dallas County:
- Go to website: http://dcad.org/
- Search Appraisals
- Input Property Address
- File Homestead Exemption Online
- Go to website: http://dcad.org/
WHAT ARE OVER-65 EXEMPTIONS?
Over-65 & Disability Exemptions (Now known as “Other” on DCAD on website):
- Over-65 and Disability Exemptions are available when owner turns 65 or becomes disabled (eligible for one only, not both).
- Over-65 exemption also creates a tax ceiling (“freeze”) for school taxes based on taxes for the first year of eligibility (other municipalities may also offer tax ceilings, but are not required by law). If home is improved (remodeled) or if owner sells, ceiling may be raised. Percentage of ceiling may be transferred to next home.
- Over-65 may be transferred midyear to new home, but should remain for the remainder of the year if owner dies or moves to rental/retirement home.
WHAT DO MY CLIENTS NEED TO BRING TO CLOSING?
- Driver’s License
- Key (Even if there is a leaseback)
- Voided Check (If proceeds are to be wired)
- Driver’s License
- Funds due for the closing (Must be a wire transfer – NO ACH TRANSFER)
WHAT HAPPENS AFTER EVERYONE SIGNS?
- After signing, the funding process begins and can take several hours before the property is fully funded and the title company can release the keys.
- Lender and buyer wires must be at the title company
- Lender must approve all buyer signed documents via email
- Once we receive all signed documents, all funds, and the buyer’s lender’s authorization to disburse, we can notify all parties of the completed transaction.
- Remember: Buyers should not necessarily plan for movers/contractors immediately after signing. There are many “pieces to the puzzle,” but in most cases (not all), buyer and sellers can expect funding authorization by/before close of business on that day.
FROM SELLER: Why is my mortgage payoff higher on the closing statement than what my principal balance shows?
Your client is only looking at their principal balance and not taking into account interest thru the closing date (mortgages are paid in arrears).
FROM SELLER: I escrow my property taxes so why am I paying the taxes on the closing statement?
The title company is insuring that the taxes are paid so they must collect for the taxes on the closing statement. Once the seller’s loan is paid off, then their lender will issue a refund of all amounts held in the escrow account. Typically, the refund relay takes 30 – 45 days.
FROM SELLER: When I purchased the house, I was single so does my spouse need to come to the closing?
Yes, Texas is a shared property state, and thereby, spouses have an interest in the property.
FROM BUYER:My spouse is not on the loan so do they need to come to the closing?
Yes, Texas is a shared property state, and the lender will require a certain number of documents signed by any spouse/intended occupant(s) to comply with the Texas requirements and foreclosure process(es).