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Archive for the ‘Title Insurance’ Category

How to Read a Preliminary Title Report

You will receive a Preliminary Title Report from your title company shortly after you and the seller reached an agreement for the purchase of your new home. The Preliminary Title Report is the first important document you will receive when you buy a home. It is a thick document, which has several key sections, and being able to read a Preliminary Title Report is very important. Today I’ll tell you how to read it.

Preliminary Title Report

Preliminary Title Report

The first section of the title report will tell you who is vested in title, i.e. who owns the property legally, and it will also show you as the proposed insured. Why do you need title insurance? A title company will insure that the title you get is free and clear of all mortgages (except your own new mortgage), liens of any kind (labor liens, mechanic’s liens, federal tax liens), judgments against the seller, and any other clouds on the title. The seller actually pays the one-time premium for your title insurance, but if you get a loan, your mortgage company will also require a mortgage title policy, and you will pay for that.

Preliminary Title Report Special Exceptions

The preliminary title report shows what is on the record now when your transaction is pending, but when your transaction closes, you will get a final title report showing that you are getting a clear title. The most important section of your preliminary title report is called “Special Exceptions,” and this is where you will find everything that is recorded against this real estate, and any related potential liens or title issues, including the list above.

If there are Covenants (CC&Rs) on the property, you’ll find mention of that in the Special Exceptions of your preliminary title report. If there is an easement running over the property, it will show up here. Normally, you will get a copy of all related documents attached to your preliminary title report, so that’s why this is so important. You should read through the title report and all the attached documents. You may need help from your Buyer’s Agent interpreting the covenants or the preliminary title report, but you can always get title answers directly from your title company.

One important thing you should know is that if a neighbor has or is making a claim to part of the property by way of adverse possession, or a claim to access to his property by way of a prescriptive easement, those potential legal claims do not show up on a preliminary title report.

And now you know how to read a preliminary title report.

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Title Issues Can Delay Your Closing

Title issues come in a variety of sizes and shapes, and they can delay your closing or kill your transaction entirely. Title issues include things like a defective recorded document, a judgment, a Federal tax lien, a cloud on the title, like a neighbor who is claiming adverse possession of a strip of land, a gap in the chain of title, a probate that was not completed, and that is just the tip of the iceberg.

Title Issues

Title Issues a Threat

Normally a title issue is discovered as soon as a preliminary title report is prepared by the title company. I saw many defective real estate documents during the years I practiced real estate law. Here’s an example. A property owner decides to create a view easement over a second lot that he owns, because he plans to sell that lot. He hires a surveyor to legally locate and describe the the easement portion of the lot, and the surveyor prepares the drawing showing the easement on the plat, and he drafts an easement agreement. But here’s where the surveyor creates a huge problem for the seller that the seller does not discover until he tries to sell his own house many years later.

The surveyor drafted and recorded a defective easement document. Surveyors are not lawyers, and the two jobs are substantially different. Drafting a legal document like an easement agreement requires legal sufficiency, and surveyors do not go to law school or practice law to learn how to draft legal documents. But surveyors practice law without a license all the time. No one cares, and if they could draft legally sufficient documents, it would be no big deal, but when they record defective agreements that are not discovered until years later when a property is sold, it can create a major title issue, a problem that has to be solved in order to get title insurance.

Title Issues Solved

This can mean hiring an attorney to draft a legally sufficient document, one that the title company will like so they can insure the title. It can delay the closing, and if the required parties are not available or refuse to sign the new agreement, there will be serious trouble. If a buyer cannot get title insurance, they will not be able to get a loan.

Title issues are something you cannot anticipate, but as I’ve written elsewhere, there are a thousands traps for the unwary in real estate. Getting good advice is important if you have title issues. Knowing what the problem is, how to solve it, and applying a diplomatic touch usually will get you through title issues.

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Is Title Insurance Necessary?

Title insurance is a wise purchase.  Truth is stranger than fiction. Imagine purchasing a beautiful piece of real estate intended to be your retirement property and getting stuck with a judgment which was not on the record when you bought your property. It happened to Helmuth and Beverley Prochaska in Whatcom County, Washington.

Title Insurance Necessary?

This article reviews the recent Washington Appellate case of Prochaska v. Midwest Title Guaranty Co., 85 Wn. App. 256 (March, 1997).  You’ll see the importance of title insurance.

Title InsuranceThe Prochaskas moved here from South Carolina. They went through the normal and cautious procedures to purchase their dream property: they included financing contingencies in the Purchase & Sale Agreement, and they obtained and paid for a title insurance policy. The purpose of the title insurance policy, of course, was to insure that they would get a clean title, free from encumbrances of any kind. They did everything you would do in a normal transaction.

Title Insurance and Real Estate

Disaster strikes! Nine (9) minutes before the title company recorded the Prochaska’s statutory warranty deed, an out-of-state judgment against the seller of the property was recorded with the Whatcom County Superior Court clerk. Two days later the Superior Court clerk entered the judgment on the official court records (also known as the execution docket). So the judgment was not actually discoverable by anyone who searched the public records until two days after the Prochaska’s deed was recorded.

To be sure there is no misunderstanding, I want to state the dates and the times. The out-of-state judgment (against the seller) was filed on September 14, 1988, at exactly 10:05 a.m., and the Prochaska’s statutory warranty deed was recorded on September 14, 1988, at exactly 10:14 a.m. Recall that the judgment did not get recorded on the records by the clerk until September 16, 1988.  Was there title insurance?

Most of us would conclude that the Prochaskas own the property and are ahead of the judgment, or to say it another way, the judgment did not attach to the Prochaska’s property since the judgment against the seller came after the closing and recording to the Prochaskas.

Not so, says the Washington Appellate Court. Listen up, because this decision is a title company’s worst nightmare, and it could also create a problem for a buyer. It deals with an age old problem for title companies, but the court inks what one would only hope could not be.

The court bases its ruling on technical interpretations of the law and this has everything to do with title insurance.  As many of us know, judges can give us some incredible law this way. The court hangs its hat on the fact that RCW 4.56.200 establishes that a judgment becomes a lien on real property upon filing with the county clerk. Apparently, it is so what if the clerk doesn’t get the judgment entered in the public record for a couple of days later. The court goes on to say that the Prochaskas had constructive notice when the judgment was filed, even though there was no possibility they could have discovered it until September 16th.

Concluding, the court says that the out-of-state judgment is a lien on the property (a $100,000 lien), and the Prochaskas are stuck with it. The court politely says that the Prochaska’s remedy is to go after the seller or the insuring title company on the protection afforded in the title insurance. Guess who is going to get stuck with the bill? Right! The title company, because as in most cases, the seller is like the turnip from which you can get no blood. By the way, the title company did a good job closing this transaction, and there was nothing the title company could have done to prevent this whole scenario.

Title Insurance is Cheap

Now, does anyone want to complain about the small premium you pay your title company for taking huge risks? Not me. In my opinion, the title companies do not charge enough to close and insure your title.  Title insurance is a bargain.

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    Chuck E. Marunde, J.D.

    Sequim Buyer's Agent (Atty Ret.)
    Founder and Broker of
    Sequim & Port Angeles Real Estate dba iRealty Virtual Brokers
    125 Olympic Ranch Ln, Sequim, WA
    (360) 775-5424

    From Los Angeles

    It's rare, but once in awhile life provides the perfect collaborator for an important endeavor such as buying your new home. For me that person was Chuck Marunde. His two decade background as a Real Estate Attorney, his prolific career as an author of articles and books on Real Estate and his forthright and moral character made choosing Chuck a no-brainer. Chuck is dedicated, thorough, incredible at the negotiating table, knowledgeable about all local laws & regs but, most importantly, Chuck loves what he does. And what he does is find his client the perfect property. Chuck isn't about making the sale, he's about making the sale that is OPTIMUM for his CLIENT and this makes Chuck a rare bird indeed. I love my new home in Sequim and I am indebted to Chuck for making it happen. Kevin E.

    From Seattle

    I’ve had the pleasure of working with Chuck over the past three years in selling my parent's estate. It was a tough time to sell during the housing recession, but Chuck always kept things on the positive side. With his real estate law background, he offers sound, practical advice. He helps you along with the process using discussions and reason, rather than opinions and speculations. If Chuck doesn’t know the answers, he will get them for you. In several instances, Chuck took the initiative to meet with county officials to get up-to-date facts about zoning and regulations. I was always impressed with his company’s tech savvy communi-cations and internet presence: weekly email updates, blogs, videos, links, Linked-in networking, etc. He is truly pioneering the future of buying & selling real estate. Brian M.

    From Florida

    We do our homework for the task at hand and we look for and expect to enlist partners that do the same. It was our good fortune to select Chuck Marunde of Sequim and Port Angeles Real Estate to represent us as a buyer's broker in our search for a home in the Sequim/Port Angeles area. Chuck's site is all encompassing and super fast compared to many others, he knows the market at every conceivable level and his guidance through the process of selecting and purchasing a home is priceless - above and beyond that of anyone with whom we have ever worked. Add to all this his 20 year background in real estate law and you have discovered a superb asset in the adventure of purchasing a home. Greg and Marilyn

    From Gilroy California

    As an out of state buyer unfamiliar with the area, it was important to me not only to have a real estate agent who knew the area well, but also one who knew the value of the properties. I chose Chuck because he is also a real estate lawyer and it is reassuring to have that extra degree working for you. I selected the houses I was interested in on line before taking a two day trip to Sequim to look at them in person. I sent my list to Chuck, who gave me feedback, then organized our tour so we could see 16 properties in a short time. He was very accommodating, driving me all over Sequim, and rescheduling appointments when we fell behind on our time. On day two, I found my home and we drafted an offer on it that evening. By the time I arrived back home on the plane the next evening, my offer had been accepted. Chuck was honest about what it would take to get me into my new home, while having my back the entire transaction. Since I was unable to relocate immediately after closing, he and his assistant Ade, have been taking care of many additional responsibilities for me. He was a pleasure to work with. Chris D.

    From Corona California

    The best decision I made, once I settled on Sequim as the ideal place to spend the rest of my days, was to hook up with Chuck Marunde as my broker/go-to guy. He happily took on the entire complicated merry-go-round associated with a long distance move that involved selling in Southern California (with a different agent) and buying in Sequim – all in the span of just over a month. The unexpectedly quick sale of my previous home was already a week into a 30 day escrow when I got to Sequim for my house hunt. We had two days to find my slice of heaven. And day one was less than stellar, each home having at least one major issue. The killer was the dream home that turned out to be an unmitigated disaster once we got inside. I was crushed. Chuck had his work cut out for him that night. And he worked his magic. On day two there was one beautiful possibility, but not quite right. Suffice to say, in the early afternoon we pulled into a driveway and the first words out of my mouth were “That’s my house.” 29 days later I took possession of my new home. Every sale has its issues, but throwing in the complications of a short escrow on top of 1200 miles of separation from all documentation, etc. gives new meaning to “challenging”. Thanks to his encyclopedic knowledge coupled with a great sense of humor, Chuck was able to keep me on an even keel when things got dicey. He knows when to step in and when to let it evolve. I cannot imagine making this move without him. Rebecca B.
    Sequim Real Estate

    From Bakersfield California

    "During the months of February and March 2012, Chuck showed my wife and I over two dozen homes from Port Angeles to Port Townsend. We found Chuck to be very helpful, friendly and courteous. With Chuck there is no pressure; It is all about finding the best home for the buyer. As a Buyer's Agent, Chuck will give you his honest opinion of a property, including a fair market price. In one instance Chuck wrote up an offer for us which was accepted. Chuck was very helpful arranging for home and well inspections which involved multiple trips to the property. Unfortunately, escrow failed to close when, during the home inspection process, it was determined that a septic system repair was needed which the seller was unwilling/unable to make. We will continue to work with Chuck as there is no better Buyer's Agent on the North Olympic" Bert and Sally

    From Los Alamos New Mexico

    "Over a year ago, during a visit to the Olympic Game Farm, we developed what we eventually called the “Sequim Syndrome.” We live in New Mexico and decided Sequim was where we wanted to live in retirement. On our second visit to Sequim, we met with Chuck and asked him to help us. Chuck's web site provides such amazing search capabilities. Chuck's site also contains a 1000 blog postings and a real estate video series detailing buying real estate in Sequim. We bought Chuck's book about Sequim real estate and set out to follow his advice carrying on an ongoing email and phone conversation with Chuck. Doing our due diligence “Marunde style” and using his MLS search site, we came up with about 50 homes that met our needs. We narrowed the list down to 15 properties that best met our needs. We came back to Sequim a third time with our list in hand, and Chuck spent two days with us showing us all the homes on our list. Not only did Chuck help us find that dream home, he spent time to educate us about the quality of construction, fair market values of various properties, home layouts, and the joys of Sequim living. We had a great time as we traveled from house to house. By mid afternoon of the second day, my wife said we had found “the house.” Chuck helped us draft our offer and sent our offer to the seller's agent. It turned out there was a second offer made on the property at the same time. Chuck's help to make a clean offer paid off. At breakfast two days later, we got a call from Chuck saying our offer had been accepted by the sellers. We are now back home in New Mexico. Chuck attends every inspection on our behalf, updating us at every turn by email and phone. Our dream home is becoming a reality because of Chuck and because we were smart enough to follow his advice. We absolutely would NOT have been able to do this without Chuck Marunde's expertise and enthusiasm. We recommend Chuck to everyone planning a move to Sequim, Port Angeles, or anywhere on the Olympic Peninsula. Chuck is a gold mine of information and expertise for home buyers everywhere, not just on the Olympic" Larry and Shirley
    Sequim Real Estate Bookstore

    From Sun Lakes Arizona

    "We are ex-Washington residents who currently live in Arizona. We had been searching the Puget Sound area four years for a waterfront property to build a retirement home when we first contacted Chuck Marunde through his website. We had made multiple trips to various areas but most of the Realtors we contacted simply sent us an email, provided no follow up and did next to nothing to help us locate a property. On our first trip to Port Angeles, after connecting with Chuck, we purchased our dream property. We now own a high bank waterfront lot overlooking the Straight of Jaun de Fuca, and are excited to become part of the Peninsula community." Paul and Linda

    From California

    "Andy Romano is a successful motion picture character actor with over 40 years in 'the Biz.' Mr. Romano has a home in beautiful Santa Barbara, California, but he chooses to live most of the time in Sequim, Washington on the Olympic Peninsula in the great Pacific Northwest. Why? In his own words, 'Because it's even more beautiful and surrounded by more beauty in this incredibly peaceful and quiet place. With respect to real estate agents or brokers, well my friend Chuck Marunde, owner of Sequim and Port Angeles Real Estate, is hands down the best there" Andy R.

    From Sequim

    I’ve known Chuck Marunde for several years. My wife and I bought and sold one house through his services, and now have another listed through him for sale. Whether Chuck was representing us as the buyer or seller, I am confident he always had our best interests at heart. He helped us set or negotiate a reasonable price, and made sure there was a clear and open line of communication. He responded rapidly to email and phone calls and always knew the best person to contact for the various services involved in a transaction. I have worked with quite a few real estate agents and Chuck is right at the top of my list of good ones. Actually, Chuck is first and foremost just a good person, and he carries his personal honesty and integrity over into his profession. He has the greatest depth of experience in real estate of any agent or broker I have known. His years of practicing real estate law prior to becoming a broker are evident in the meticulous care he takes with the process and documentation. I am impressed by the way Chuck has integrated internet services into his real estate business. He probably knows more about this process than any other realtor in the country. In this tight market it is important to use every possible means to spread the word about available properties…to reach the few people who might be interested in a particular property. Steve L.

    From The Netherlands

    "We contacted Chuck about six months ago to help find a retirement property in Sequim. We had visited Sequim several weeks before and decided that this was the place for us to retire. We liked the friendly people and the natural beauty of the area. We had been looking for some time in other parts of the country - California, Oregon, North Carolina, and Vermont. In most of these other areas, we found real estate agents that were knowledgeable but did not follow up with us to continue narrowing down real estate possibilities. Once we were out of earshot, communications would stop. That is one of the reasons we were interested in working with Chuck. Besides having great knowledge of both the local real estate market and of law, his testimonials on the internet indicated a willingness to actively communicate with his clients. Chuck demonstrated this immediately. Even before we met, he responded very quickly and helpfully to any email question. After arriving for a second visit to Sequim in September, we finally met Chuck face to face. He was friendly, encouraging, and readily shared good practical information. We worked with him on a number of candidate properties - including an offer on a property while visiting that week. Although we could not come to terms with the owners on the final property price, we look forward to continuing to work closely with Chuck. He is an invaluable resource to help us identify and purchase the retirement property that's right for us." Paul and Virginia

    From Fremont California

    We can't say enough about working with Chuck Marunde. Luck would have it that we discovered his web site, spoke with him on the phone and had an instant feeling that we had found our realtor. And we were right. With Chucks help and expertise, our longtime dream to retire to the Pacific Northwest came to fruition with Chuck assisting us in finding the perfect home for us. Buying a home is always a big decision and these days can be complex with unexpected delays etc. In fact, our whole experience from offer day to closing, was very smooth. Chuck took all the time we needed to explain processes and made us feel at ease, even though we lived 800 miles away, tying up loose ends and getting ready for the big move to our new home in Sequim. We were impressed with Chuck's ability to listen to our needs and understand our concerns in buying from a distance. Chuck kept us informed all along the way, during the process and was so good at getting right back to us if we had another question. All went so well and Chuck really went above and beyond for us, taking time out from his busy schedule to assist us with some details regarding our beautiful property, even after the closing, because we were not yet arrived there. Without hesitation, our son and his wife will be contacting Chuck this summer, as they plan to follow us to paradise in this lovely town. Thanks again Chuck, for everything! Mary and Jerry

    From Fontana California

    My husband and I went to Sequim intending to interview several realtors to find one to help us locate and buy a home in Sequim. We knew we wanted someone we could trust and who would have our best interests in mind. Since we would be handling the transaction from S. California this was very important to us. We met Chuck and looked no further. We felt a connection right away and spent some time looking at homes together so Chuck could get a feel for what we wanted. Well, we left Sequim having made an offer on a home which the owner accepted. Chuck has helped us through the purchase process. We are positive it would not have gone so smoothly without his help. We give him 4 thumbs up. Wally & Cathy

    From Tacoma

    Chuck Marunde’s level of expertise in real estate investment is amazing. His knowledge, experience and legal training have given me a dramatic advantage in real estate investing. He works hard to stay on the cutting edge of real estate marketing, sound advice and value-added service for his clients. Kirk Wald, Financial Planner

    From Wendell Idaho

    My wife and I moved to Sequim six weeks ago, and prior to our move here I contacted Chuck Marunde and enlisted his help as our buyer's agent. Once we got here, it took us about two weeks looking at houses, and Chuck did a superb job of showing us places and letting us make our own decisions and guide us through the purchase of our home. We now completed our transaction and are very happy. We would recommend Chuck to anybody. Don & Marilyn

    From Sequim

    "Buying property either commercial or residential can sometimes be a tricky proposition. That’s why I would recommend Chuck to help you with purchasing or selling property. His background as a real-estate lawyer and his no nonsense to the point advice will help you make the right decisions. Experience and Integrity, what you need when you can’t afford to make a mistake. Dail Hurdlow, CEO, Hurdlow Enterprises

    From Seattle

    I am an experienced real estate buyer, but I am not from the Sequim area. I am somewhat flexible, realistic, but also particular. So the question was, “how do you choose the RIGHT real estate agent?”

    I made my appointment with Chuck on a Sunday morning in March, 2013. He showed me 5 houses. Every house he showed me was within my parameters! I was amazed: a real estate who listened, did his research, and didn't waste my time showing me houses I would never buy! I made an offer a few days later. That was the easy part…

    Buying a house is always a stressful time in life. Advice to Buyers: choose an agent who is competent, communicates well, and has exceptional follow-up and follow-through! You will spend a lot of time with your agent during the process. Choose someone likable. Go with your gut. I got to know Chuck during the process, and he's a great guy!

    You need an agent who is competent to handle and help you negotiate the issues that come up during disclosure, home inspection, appraisal, etc. Chuck's competence is superb! I got truly professional, sound, straightforward advice.

    Chuck's communication skills are exceptional: phone, email, fax. He has a wonderful ability to stay "on-point" with what is actually important and doesn't lead you astray on issues that aren't so important.

    Chuck's turn-around time on questions, issue resolution, etc. was virtually always within 24 hours. He follows-up, follows-through. He does what he says he will do timely. This relieves a lot of Buyer stress!

    Having a difficult time finding the right agent? Simplify your life! Choose Chuck Marunde. I did. [Name withheld by request]

    Intro by Chuck Marunde

    From Sequim to California

    "In our Sequim real estate broker Chuck Marunde we found a Realtor who knew not only how to list a property, but most importantly, he knew how to sell a property. Chuck is very skilled in current technology and uses that skill to advertise your property nationally. We were very pleased with Chuck, his honesty and integrity." Jerry Levitan and Donna "Teva" Tetiva

    Who is Chuck Marunde?

    Chuck Marunde is the #1 Sequim Buyer's Agent, having sold more homes (by volume) to buyers than any other agent or any "team" of agents for the past seven years. He is the author of thousands of articles for buyers on this real estate blog, and he is the author of several real estate books for buyers and one for sellers. He is the creator of many free tools that buyers use and love every day. He is recognized as a national expert on real estate transactions, marketing, and negotiating. Please schedule your appointment to view homes with Chuck well in advance of arriving in Sequim.
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