Chapter 9 - Deeds, Title, and Closing

Presumption of delivery where

- Actual delivery occurs - Deed is acknowledged by the grantor before a notary, or - The deed is recorded

3. Grantor with Legal Capacity

- Age and Mental Capacity (must be age of majority - 18 years old) - Must be of sound mind - Many state provide that the grantee doesn't have to have legal capacity

TRID Applies to

- Closed-end consumer credit transactions secured by real property - Must be a one-to-four unit family residential property including: -- First and second mortgages -- Refinances -- Construction-only loans

What quitclaim deeds transfer

- Conveys any right, title, and interest the grantor may have in the described property - Grantor makes on promises that the grantor actually has right, title, and/or interest in the property being conveyed

Types of Deeds

- General warranty deed - Special warranty deed - Grant deed - Deed of bargain and sale - Quitclaim deed - Judicial and Trustee deeds

Judicial Deed

- Issued as a result of a court order - No warranties are provided

Trustee Deed

- Issued by a trustee in foreclosure proceedings - Few, if any, warranties are provided

TRID - Prohibited Conduct

- Kickbacks (giving anything of value) or unearned fees - Referrals by someone who owns a 1% or greater interest in the company receiving the referral - Requiring the use of a specific title company

Grantors of sound mind understand

- Legal significance of a deed conveyance - To whom the property is being conveyed, and - Nature and value of property being conveyed

Title Insurance protection limitations

- Protects only the insured's (buyers) named in policy for defects existing only at the time of closing - Seller and subsequent purchasers not afforded protection by the title policy

Loan Estimate

- Provides summary, key features, costs and risks for mortgage they are applying - Allows borrowers to "shop" loans against other lenders - Lender can include only those charges borrower is likely to have to pay - Final costs cannot exceed the loan estimate by certain tolerances percentages

Referral OK if disclosures are made:

- Referring party owns an interest in the provider - An estimate of the charges the provider will make - A statement that use of the provider is not mandatory

Disclosures that are required under TRID

- Special Information Booklet - Loan Estimate (at application)

2. Grantor and Grantee must be clearly identified in the deed

- Spelling mistakes in a name can be corrected by a statement of identify correcting the mistake - Aliases (aka's) should be listed - Give status of the grantee - If parties will hold in disproportionate shares, percentages of ownership must be listed

When quitclaim deeds are used

- States with powerful title insurance companies - Gifting real property - To resolve disputes or clear up questionable title

Deed of Bargain and Sale ("As-Is Deed)

- Used when the grantor implies that he or she has title to property - Grantor makes no other covenants to the grantee other than the implied ownership

Marketable title is not affected by

- Visible easements - Covenants, conditions, and restrictions on the use of the property - Zoning and local land-use ordiances

5. Must express the intent to immediately convey a property interest to the grantee

- Words must convey an intent to transfer title - Standard form include: "do hereby grant and convey", "do hereby grant", "do hereby quitclaim" etc. -- words will control warranties or promises made

Common methods to providing marketable title

1. Abstract of title with attorney's opinion 2. Purchase title insurance 3. Use Torrens system for title registration

Exclusions from Title Insurance

1. Boundary disputes 2. Non-recorded easements (ie: easements by implication or prescription, could get general warranty deed) (except landlocked parcels) 3. Zoning restrictions 4. + others

Tolerance percentages

1. By zero tolerance 2. 10% tolerance 3. No tolerance

How records are maintained

1. Grantor/ Grantee Index System 2. Tract Index System

Common types of closings

1. In person (Title closings) 2. Through escrow

Requirements for Valid Deed

1. Must be in writing and signed by the grantor 2. Grantor and grantee are clearly identified 3. Grantor with legal capacity 4. Property must be adequately described 5. Deed must express an intent to immediately convey a property interest to grantee 6. Specify the type of interest and rights given to the grantee 7. Acknowledgement 8. Delivered by the grantor and accepted by the grantee

Methods of determining priority

1. Pure race aka "wild wild west" 2. Notice 3. Race/notice

Cloud on title

A defect or potential defect in the owner's title arising from a lien, easement, or court order

1. In person - Title closings

A settlement agent arranges for interested parties (buyers, sellers, attorneys, real estate agents and lender representatives) to meet, review documents, execute documents and exchange title - Used throughout most of US except the west

1. Abstract of title

A written opinion tracing the chain of title for the property accompanied by an attorney's opinion as to the title - Not a guarantee but an opinion of an attorney whether title is marketable

Documents required to be recorded

All instruments affecting title to land - Deeds, mortgages, liens

Kickbacks

Anything of value received for referrals of settlement-service business

TRID doesn't apply to

Business loans Commercial loans

2. Through escrow

Buyer and seller deliver documents to an escrow agent who holds documents in trust until all conditions for closing are met - Used primarily in western US - Parties do not meet in person

Marketable Title

Buyer has right to title that is free from encumbrances (easements, loans, mortgages), liens (property taxes) - Title needs to be marketable at closing

By zero tolerance

Cannot vary at all from what the original loan estimate provides Costs included: Origination charges & Underwriting charges Costs include: - Origination charges - Underwriting charges

Certificate

Considered title

Grant Deed

Contains implied covenants or warranties: - Grantor has not previously conveyed the property to anyone other than the grantee, and - Property is free of undisclosed encumbrances made by the grantor

Allocation of closing expenses

Costs to close vary widely across the US - Costs can be allocated by the purchase contract; otherwise, follow custom and practice of local real estate industry

Damages awarded through title insurance

Costs to correct defect in title + costs of litigation

American Land Title Association

Created the form most widely used by insured. Protects against: - Title that is held by someone other than the insured - If there is an encumbrance on title to the property - If title is unmarketable - If the insured has no right of access to the property (property is landlocked)

6. Specify the Type of Interest Conveyed

Deed declares what type of land interest the grantor is conveying - Fee simple: "To A and her heirs" (Default) - Fee simple determinable "To A so long as the premises is used as a school..."

4. Property must be adequately described

Deed must contain an adequate legal description so that it can be identified (plat map, government survey, etc.)

8. Deed must be delivered to the grantee

Delivery: actual or constructive

No tolerance

Fees may change as much as necessary Costs include: - Homeowner's insurance

10% tolerance

Fees may vary + or - 10% Costs include: - Recording fees

1. Pure race aka "wild wild west"

First to record takes title to the property

General Warranty Deed

Grantor provides certain warranties to the grantee

Constructive delivery

Grantor releases all control of the deed - The intent of the grantor is critical -- grantor must intend to relinquish all control of the deed

... and signed by the grantor

If two persons hold title, both must sign the deed - if grantor is incapable of signing... ?

Prohibited Conduct Penalties

Kickbacks or illegal referral penalties - Criminal cases: $10k and/or up to 1 year in prison for each violation - Civil cases: 3x the unlawful charges + Court costs and Attorney fees Requiring particular title company - 3x amount charged for title insurance + court costs and attorney fees

Mortgage Servicing Disclosure

Lender must disclose whether it intends to service the loan or assigned, sell, or transfer the loan

TRID - Disclosure Penalties

No express penalties for failure to make disclosures - Federal Consumer Financial Protection Bureau is charged with enforcing violations -- File complaints -- Seek injunctions

Closing

Occurs when all parties have fulfilled their obligations under the contract and the closing agreement/escrow instructions - The goal of every real estate transaction - Buyer receives deed, Seller receives payment

7. Acknowledgement clause

Parties appear before a notary public (or other authorized state official) Acknowledgements include: - Date - Name of notary/official - That person signing is same as identified in the deed

Actual delivery

Placing deed into hands of grantee

Warranty deeds provide 6 warranties

Present Covenants 1. Seisin 2. Right to convey 3. Free from encumbrances Future Covenants 4. Covenant of warranty 5. Quiet enjoyment 6. Further assurances

Unearned fee provision

Prohibits a person from giving or accepting any part of a charge for services that are not performed

Race Notice Statute

Property goes to the first BFP that records - CA falls under this

Quitclaim Deed

Provides NO protections or warranties about title - In substance, with a quitclaim deed, "If I own any interest in the property I convey it to you"

Title Abstract

Provides a condensed chronological summary of the title's history - with an attorney's opinion, it follows a chain-of-title search

TILA-RESPA Integrated Disclosure Rule (TRID)

Provides consumers information about the cost of their mortgages and closing

Special Information Booklet

Provides explanations and next steps to obtaining a mortgage

Closing Disclosure

Provides final summary and explanation of all costs of the transaction - Must be done 3 days prior to consummation of the loan -- Consummation: when you sign the loan documents

2. Title Insurance

Provides insurance for purchaser if defects (a cloud on title) exist for a property at the time of the property transfer) - Protects only the insured's (buyers) named in policy for defects existing at the time of closing - Seller and subsequent purchasers are not afforded protection by the title policy

Special Warranty Deed

Provides same warranties as a warranty deed with one condition - Warranties are limited to only the period of time grantor owned the property

Knowingly recording a false grant deed

Punishable felony

BFP

Purchaser without notice (actual or constructive) - conveyance not recorded

Method of how land ownership is maintained

State vary with their recording systems - Purpose is to protect title to the property by preventing fraud

Marketable Title Act

States can adopt a statute providing how far back title must be searched, what rights may be exercised and what the time period to sue is (Statute of Limitations) - Usually limited to 40-60 years

1. Must be in writing...

The SOF requires that an evidence of a writing exist to transfer title to real property (usually done by a deed)

2. Notice Statute

The last bona fide purchaser (BFP) keeps title

8. Acceptance by the grantee

The law presumes acceptance where there is delivery - A grantee may refuse the conveyance by making a clear sign of refusal

3. Torrens System - Title Registration

Use a certificate and deed to identify ownership in property -- Purchaser requests grantor to surrender to the county recorder the grantor's certificate of title, along with a deed -- Recorder cancels certificate and issues grantee a new certificate (recorder also has a duplicate certificate to retain for its records)

Deed

Written instrument of conveyance - SOF requires that transfers of real property be in writing