Last Update: 3/6/18
Closings for residential real estate (homes, condos) are often held at the offices of title companies here in South Florida (even though most real estate lawyers will close a transaction at no additional cost). One of the most important aspects of a real estate closing, is the title work, which is an often under emphasized issue at closing. (The title company usually, at least in my experience, focuses on getting the deal closed and lets the title underwriter worry about the title work.)
In our part of the state, real estate records are kept in the Broward County, Miami-Dade County, and Palm Beach County public records. They not only cover every square inch of land in each county’s jurisdiction, these records track the ownership of land here for hundreds of years — back to the Spanish land grants of long ago.
The Importance of Title at Closing
In any closing, but especially a Florida closing where someone is buying their primary residence, that buyer assumes that the seller is legally transferring full ownership of the land, and the improvements built upon the land (house, driveway, fence, sewer drains or septic systems, etc.), free and clear of any liens or encumbrances. However, those assumptions can sometimes be wrong.
If the seller is unable to convey “clear title” (the term used in most Contracts is “marketable title”) to the buyer, then the transaction should not close. The closing should not happen because the seller cannot transfer what he or she has agreed to sell to the buyer in most Florida residential real estate contracts (i.e. The Florida Realtors/Florida Bar Contract).
Title Search and the Title Report
So what happens to make sure there is “clear title” or “”marketable title” at the closing table? Before closing, a title search is performed to confirm that the seller is indeed the legal owner of the property being sold.
The title search will also reveal any claims against the property — from a lien filed by a contractor who wasn’t paid for work done on the home or condo to any mortgages and/or equity lines. Anything that interferes with clear title is called a “cloud on the title” and the seller needs to get these matters resolved before closing can take place.
In Miami-Dade and Broward Counties, title searches are performed by the closing agent (i.e. the title company or lawyer closing the transaction) who have expertise in investigating real estate records and claims against property. The reports are usually prepared by title underwriting companies who will issue a title report that summarizes the title company’s findings.
Once the buyer has the title report, then the seller needs to resolve any problems identified in the title report. If the title cannot be cleared for the closing, then the sale may fall through — if not because of the buyer walking away, then because the lender will not go forward with the home loan without a clear and clean title on the property.
Title Insurance Policies
In Florida, title insurance is an important component of our real estate industry. It facilitates the timely transfer of property between buyer and seller and allows for mortgage lenders to confidently lend money to property owners.
An “owner’s title insurance policy” is an insurance policy that provides coverage for the owners of real estate in the event there is a defect in title, a valid lien against the land, or other legal claims against the real estate that result in a loss in interest held in the property (mortgage lenders receive a “mortgagee title insurance policy”). If there is a successful challenge to the policy holder’s title, then the coverage will pay for the damages that result (up to the policy amount).
Title insurance is a part of almost every residential real estate closing here. Lenders mandate that title insurance policies (with the lender as the named policyholder) are in place before they’ll fund a home loan, for example. Nearly every cash buyer will often ask for an owner’s title policies, too.
It’s a big business, and the Florida Department of Insurance oversees the title insurance industry in the State of Florida. There are laws and administrative rules in place regarding how title insurance policies are to be sold and what they may and may not provide in their coverage. There are also regulations regarding what these title insurance companies can charge for this real estate title protection.
Florida Title Insurance By The Numbers
As of the latest report there are:
- Licensed Title Agents: 6,918
- Licensed Title Agencies: 2,573
- Title Insurers: Six title insurance companies write approximately 80 percent of title insurance policies in Florida.
Should A Florida Lawyer Conduct Real Estate Closings and Issue Title Insurance?
Experienced Florida real estate lawyers representing buyers of single family homes, condos, or other residential real estate know what to look for when reviewing a title search report (especially when the home being sold is a foreclosure). This review is usually to occur at least 5 days before the closing (see the “Title Evidence and Insurance” provision of your Residential Contract For Sale and Purchase).
Simply stated, the title insurance policy is designed to protect the buyer for years into the future. The policy represents to the buyer that he or she has clear and marketable title to the real estate — no contractor is going to be knocking on their door demanding to be paid for work done before they bought the place or there are no unsatisfied mortgages, for example.
Title insurance underwriters have title agents (title companies or lawyers) that conduct the title search, issue the title insurance policy and close the transaction. Florida title insurance lawyers understand the duties and liabilities that come with title insurance coverage, and have an ethical obligation to assist buyers and sellers with making sure that the closing proceeds with as much protection as possible against future title challenges (most Florida real estate lawyers perform these services, along with closing the transaction, at no more expense than what a title company will charge to close the transaction).
If you or a loved one have a title question in a pending real estate transaction, or have a concern about some of the items listed on a title insurance commitment, then a good piece of advice is to talk with a Florida real estate lawyer. Getting someone to review all of the paperwork isn’t as costly as most of us think it is. And, it’s always a lot cheaper than paying to fix a problem after a closing occurs.
Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
For More Information, Read: 19 Reasons to Hire a Real Estate Lawyer When Buying or Selling A Home
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