Q & A With America's Real Estate Professor: Title Insurance and Escrow Documents
By Leonard Baron
Title Insurance and Escrow Documents
Q. I'm in escrow and just received a stack of paperwork from the title insurance company. One document says, "Sign that I accept the Preliminary Title Policy," but I don't really understand what that means or what I'm signing. Help! Armando S., Los Angeles, CA
A. You're not alone. About 99.99 percent of residential real estate buyers foolishly sign off on this document without reading or having any idea what it means or what they are signing.
Real estate buyers should NEVER sign anything without fully understanding the ramifications of what they are signing. Title documents should be especially concerning to a buyer.
Here's what you should do. Call the title insurance agent and schedule to go sit down with them and walk you through the documents. There are at least four vital things to review, and ask them their opinion - they are the experts - on anything else you should do.
Have them walk you through:
- Title Insurance Policy - What it does, what is covered by the policy, what is not covered?
- Title Abstract - What is the nature of each item on the abstract and how does that impact your ownership?
- Schedule of Exclusions - What is excluded from coverage, specifically related to your property, by the title insurance company?
- Plat or Survey - What is the legal outline of the property recorded at the county, any easements, encroachments, etc. Have the title company plot on the plat and explain any issues to you and you need to walk the property with the plat (or have it surveyed) to see if anything seems to be impacting your property ownership.
It's a lot of work and a challenge to do all this, but you take the risk of something going wrong if you don't. Use the expert -- your title insurance officer -- to help. Don't be one of the 99.99 percent!
Real Estate Investing Too Many Buyers in Market
Q. I want to buy an investment property and the prices are just too high. I can't even get an offer looked at because there are too many investors buying properties. Will this change? Martin N. Middle Township, N.J.
A. Welcome to real estate! When prices were low a few years ago, no one was buying. Now that they are higher and headed up, everyone is buying. That's called a herd mentality! But it is also called a "marketplace." Each buyer makes the decision that they feel is most appropriate for themselves; and apparently many people believe real estate is still fairly priced even as prices are headed north.
That doesn't mean it is fairly priced for you, it just means others believe it is fairly priced. And they are voting with their dollars!
To answer your question "Will this change?" Well, I can't predict the future any better than anyone else. I personally believe that real estate is still fairly priced - primarily due to very low mortgage interest rates. When I say fairly priced I mean the long-term cost of owning real estate seems reasonable for the benefits of owning. But that isn't every property; many properties always seem overpriced to me - I call them "prize properties."
Most likely if prices continue to rise, more properties will come onto the market, and then a market equilibrium will be established. Hopefully that price will seem fair to you and you can then purchase a property that suits your investing criteria. Good luck!
Leonard Baron, MBA, is America's Real Estate Professor®. His unbiased, neutral and inexpensive "Real Estate Ownership, Investment and Due Diligence 101" textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com. Email Your Questions to: Leonard@ProfessorBaron.com
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