Tag: Commitment

Commitment Issues, Vol. 2 – Commitment Jackets

As we discussed in the first volume of this series, which can be viewed here, “issues” does not refer to problems that you may find with the Commitment, but issues, such as a magazine or a publication series, about Commitments. In the first issue, we covered the generalities of the Commitment to help landscape the idea of exactly what it is (and is not) and the purpose it serves. Now let’s dive into the finer details of different aspects of the Commitment itself.

As a Whole

As we discussed previously, “the Commitment Jacket is general, non-specific coverage that is issued from an insurance underwriter (the Insurance Company).” The term “jacket” refers to the pre-digital era, before commitments and policies were computer-generated. Everything was simply put into a paper folder with inserts. Nonetheless, the name still carries on today.

The Jackets from each insurance underwriter are fairly standardized across the board from the American Land Title Association (ALTA) and contain a notice, commitment to issue policy, and conditions.

The Nitty-Gritty

Or in other words, the jacket is the part you usually just scroll over to get to the schedules. But here is a brief summation of what each of the 3 parts is stating.

The Notice lays out what the Commitment is and what it is not. For instance, it is not an Abstract of Title, condition of Title, legal opinion, or title policy. Rather, just a Commitment to issue Policy.

The Commitment to Issue Policy section may sound redundant, however, this is the Insurance Underwriter’s obligation specifically to issue the Policy subject to the Notice, as stated, and the Commitment Conditions, Schedule B I – Requirements, and Schedule B II – Exceptions. Also included in this section is a statement giving the life of the Commitment from the underwriter. Some insurance underwriters give different lengths of time for the requirements under Schedule B I to be met before the Commitment is no longer valid. If a Lender is involved, they may have their own stipulations on how long they will accept the Commitment.

The Commitment Conditions will give definitions of terms that are pertinent to understanding the Commitment, all the components necessary to make the Commitment valid, the Company’s right to amend, and liabilities from the Company to the proposed insured. Some insurance underwriters will have more conditions than others but will include a vast majority of the same.

As you can see, the Commitment Jacket provided contains general provisions and agreements of the relationship between and from the Insurer and the proposed Insured. A Commitment Jacket will always be provided from Tallgrass Title on every transaction that we are insuring and issuing a Policy.

Be sure to keep an eye out for the next blog in the series, as we will be covering the components and aspects of the Commitment issued by the Title Company. You, too, can be Title Commitment literate and savvy!

And even if after reading this you still need clarity and have further questions, please don’t hesitate to reach out and get ahold of us. Title is what we do!

Title Searches w/Thais: Title Examiner: Boring Job or Not?

I have been asked many times, “so what exactly do you do for your job?” My first attempt at a succinct answer is to say, “I work with title insurance”. However, this generally seemed to lead to the misconception that I was somehow a telemarketer and tried to sell insurance to people over the phone. This mistake on my part led me to believe that a lot of people do not really know what goes on behind the scenes when they conduct a transaction through a title company. And when they do find out, they then assume I have a very boring desk job sitting in front of a computer all day. While I will admit that this 8-5 is not the most, shall we say, exhilarating, I think it is arguable that a Title Examiner can have a very interesting job at times.

To sum up the job of a title examiner, our job is to conduct a search of the public records at the county in which the property in question is located, and to write a Title Commitment, which is the Title Company’s binding promise to issue an insurance policy based on the terms and conditions laid out within it. These 8 or so pages often appear to just be a lot of legal mumbo jumbo, once again giving the appearance of a very boring job. But whenever there is an issue that requires further investigation on our part, we often stumble on some fascinating things, things that often can tie into the history of Kansas, and sometimes even the history of America.

Sometimes, when tracking the ownership of land, we find out that a property has been owned by generations of the same family, even tracking back to the Land Patent – the transfer of title to land owned by the government to an individual. Most of these occurred in the 1800s. Following this chain can lead to discoveries such as very old probates and obituaries, which can lay out the whole reason they moved to Kansas in the first place, and how it passed through children and generations to the current day.

Did you know that according to certain research, there are over 300 ghost towns in Kansas? [1] Some of these were just a result of a failed settlement, but others were caused by events such as the creation of the Tuttle Creek Dam, which everyone knows exists. What might not be so commonly known is that this wiped out multiple small towns in Midwest Kansas. Cleburne, Kansas [2], was one of these. Remnants of the town can still be seen today, but it has been uninhabited since the mid-1950s. Running into documents during a search that reference a town which is nowhere to be found in the present day, instigates a little bit of digging to find out the story of what actually happened.

Every job has its high points and low points, but a Title Examiner is given the opportunity to learn many interesting things, all while doing a stellar job at producing a title commitment at the end of the day. And, thankfully, not spending their day on the wrong end of a telemarketer phone call.

Commitment Issues, Vol. 1 – Title Commitment 101

No, no. This is not about problems with Commitments, or even about Buyers shopping for a home for over a year and still not happy with anything. This is a series about the Title Commitments that we issue and how to make sure you understand what you are reading. We want to go in-depth and help break down just what purpose the Commitment serves as well as its different components. The end goal is for you to be able to receive the Commitment and know exactly what the general items and terms are and how to navigate them.

The Nature and Purpose of the Commitment

The Title Commitment is a report prepared by the title company containing specific information about the property to be purchased or that is currently owned. It also legally binds the title company to issue a Title Policy – it’s a commitment. The Title Commitment, issued prior to closing, is the stepping-stone to issuing the final Title Policy, which is issued after closing. The Commitment is not the Policy, and the Policy is not the Commitment, although there will be similar information given and shared between the two.

Your Commitment will contain four parts: the Commitment Jacket, Schedule A, Schedule B I – Requirements and Schedule B II – Exceptions. Let’s parse out each of these components and give a brief run-down of what each one is.

The Commitment Jacket

The Commitment Jacket is general, non-specific coverage that is issued from an insurance underwriter (the Insurance Company) to the title company (the Insurance Agent.) This will be included with each Commitment that we issue.

Schedule A

A “schedule” in its basic meaning is simply a written form or statement of details. Regarding Title Insurance, the schedules give specific information about the property and transaction. Schedule A gives a general description of property concerning its property address, legal description, how title is currently vested, and what types of policies are going to be issued after the closing takes place.

Schedule B – Requirements

Schedule B of the Title Commitment is broken up into two separate sections: Requirements and Exceptions. The first section (Requirements) details specifically what is needed to pass clear title and issue a final Title Policy. If a purchase transaction, you will typically see some form of deed, mortgage, mortgage release, and an affidavit. If refinancing, the only difference will be no deed to convey ownership. There may be some additional items in the Requirements that will need to be addressed, depending on what is found and listed in the Exceptions.

Schedule B II – Exceptions

The Exceptions contain all things pertaining to and running with the specific piece of real estate as mentioned in Schedule A. The Buyer/Owner has free and clear title to the ownership and use of the said real estate, with the exception that their rights to use the property are subject to all those items contained therein.

Stay tuned for the next blog in the series, as we will dive further into discussion about each of the components that make up the Commitment. And even if things are still somewhat confusing afterwards, feel free to reach out and give us a call! It’s what we’re here for!

Marital Status and Holding Title

When it comes to selling your property, getting that contract signed and sent to your local title company is the first step to a smooth closing. To ensure the process goes as effortlessly as possible, there are few additional things to keep in mind when you put your John Hancock on that very important sheet of paper.

Marital Status

We often see this left off the initial contract, but it is very significant, especially for the seller. The popular maxim- “what’s yours is mine, what’s mine is yours”- is a good way of understanding why indicating marital status is so important. The State of Kansas recognizes that spouses have rights to real estate through what is termed marital interest. Even if you bought a property in your name individually, your spouse has an interest in that property and must participate in the future sale.  Therefore, we require disclosure of both parties’ marital status.  This allows us to ensure any married persons’ spouses are involved in order to pass clear title.

Taking Title

There are two common ways of taking title when buying real estate and it’s crucial that your contract indicates how you intend to hold title.

Joint Tenants with Rights of Survivorship

The most well-known way of taking title is by Joint Tenants with Rights of Survivorship, also known as JTWROS. This means that the two (or more) people buying a property will have full ownership interest upon the death of any others who are on the deed.  There are no restrictions on who can take title in this manner: it could be you and your spouse as a married couple, or it could be you and your three siblings. The surviving title holder(s) automatically receives the interest of the other title holder upon their death.

Tenants in Common

The second common way of holding title is as Tenants in Common.  Whoever receives interest in this manner retains their rights to the property for their heirs or whoever they choose to pass it to. For example, Bob and Joe, identical twin brothers, buy a few hundred acres of land with the intention of starting up a cattle ranch, taking title as Tenants in Common. Rather quickly, Bob discovers he is much better suited for his old Title examiner job in the city and wants out. Joe loves it, however, and refuses. Bob decides to sell his portion of interest anyways. He cannot transfer Joe’s rights, only his own, so whoever he sells to, will only have a 50% interest in that property. The interest in the land is split, and will continue this way, unless one of the interest holders deeds his interest to the other, or both of them to a common third party.

To wrap up

An important conclusion from this is that your marital status does not determine the way in which you take title. Therefore, we require both pieces of information on the contract. In Kansas, if the deed does not specify how title is to be held, it is automatically considered tenants in common.  It is important to clarify the way you desire to take title as married couples generally opt to take title as JTWROS to ensure that their spouse receives their interest in full at one’s passing.  Similarly, if marital status is not stated on the deed, it leaves the door open to issues down the road, such as claims of interest from a past untitled spouse.  Keeping these things in mind will be helpful when you are buying or selling real estate.

If you or your clients have questions about marital status or vesting on a current or upcoming transaction, please give us a call! It’s our job to help.

Reverse Mortgages and You!

What is a reverse mortgage?

Can I sell property with a reverse mortgage? Should my grandma get a reverse mortgage?

With a conventional mortgage, a person borrows money from a bank and the bank files a mortgage on the person’s real estate.  If the individual fails to pay back the loan to the bank, the bank uses its mortgage to sell the real estate.  Simple enough. Most residential real estate transactions involve the buyer obtaining financing from a bank to purchase the real estate.  The bank in turn files a mortgage during the process.  The funds are distributed in a lump sum to the sellers.  In a reverse mortgage scenario, funds are distributed slowly, over time to the party owning the real estate.  The lending bank files a mortgage just like a traditional purchase money transaction.

Wait.  Why would the bank make payments over a period of time to the consumer and not the other way around?

Commonly, elderly individuals that own their home and do not currently owe money against it utilize reverse mortgages.  For example, if an elderly person owns their home free and clear of liens but is on a limited income, it can be difficult to pay for day-to-day expenses of living.  At the same time, that person may have tens or hundreds of thousands of dollars in equity in their home.  House rich and cash poor.  A bank would likely not make a conventional loan to the individual because they have no source of income for repayment.  The only option for this person may be to sell their home to realize the equity.

However, a reverse mortgage will loan the individual money, typically in the form of a monthly payment, and secure the loan with a mortgage on the house.  This allows the person to realize their equity while remaining in their home. When the borrower passes away or moves out of the house, the mortgage company is either paid in full from the sale of the home or forecloses the property to sell and satisfy the debt.

Sounds decent, what’s the catch?

There are a few catches.

Unscrupulous Marketing

Many reverse mortgage companies use unsavory marketing tactics to target elderly folks.  Oftentimes folks entering into reverse mortgages do not actually require the payment to live have been convinced otherwise.

Excessive Cost

Interest rates with reverse mortgages tend to be much higher than conventional loans and reverse mortgages can carry multitudes of hidden costs to the borrower.  The interest also compounds over the life of the loan as opposed to a conventional loan, rendering reverse mortgages much more expensive.  Even worse, many reverse mortgages will only provide monthly payments for a set amount of time. So, an elderly person living off reverse mortgage payments could still be forced to sell their home and then have no money left to live.

Fine Print

Lastly, reverse mortgages are difficult to understand.  The documents are cumbersome for even a trained real estate or lending professional.  These loans can be quite one-sided in favor of the lending institution, yet many consumers enter into these types of loans without fully understanding the fine print.

Can I sell a house with a reverse mortgage?

Sure, probably, maybe, perhaps. 

Just like a conventional mortgage, if the underlying debt is paid, the mortgage will be released and the property may be sold free and clear of any liens.  Problems arise when the debt owed against the real estate outweighs the value of the home.  This is often the case with property subject to a reverse mortgage.  It is possible that the bank could agree to a “short sale,” where the bank will agree to accept less than the amount of the debt.  However, this process is typically quite cumbersome and can take several months to complete.   Additionally, there are no guarantees the bank will agree to a short sale. Several months of negotiations could result in the property not being sold.  Further, additional costs and interest continues to accrue while attempting to obtain a short sale arrangement.

Long story short, yes, a person may sell a house with a reverse mortgage.  However, best practice would be to contact the bank and request a “payoff” prior to entering into a contract for sale.  The payoff is the amount that the bank will accept for release of its lien.  If the payoff is greater than the sales price, this may be an issue that could delay the transaction.

As stated above, reverse mortgages can be quite challenging to navigate in a transaction.  That’s why Tallgrass Title has real estate professionals and attorneys on staff to assist in navigating these issues.  Give us a call, it’s our job!

What’s the Timeline for Closing Your Deal?

Here at Tallgrass Title, once we receive the signed contract in our office, the clock starts ticking on our countdown to get everything out in a timely manner.  Our goal is to be efficient, friendly, and fast in all aspects of what we do, but, sometimes the fast part does not always happen as fast as we would like. We get asked often what the time frame is to close a transaction.  In most instances, we are able to say that we can have it done within 30 days. There are situations where that is not possible and there are situations we can close in as little as a few days. The following is a rough timeline of the steps we take to get transactions closed in order to give you an idea of the potential timeline for your unique closing.

Commitment

Within 24 – 48 hours of receiving a signed contract we try to have to commitment issued to all parties. This can take longer depending on whether additional research is needed to clear the title. Generally, this means tracking down additional documents to trace the chain of title or add exceptions.

Preliminary Documents

Once the commitment is sent out, the file is assigned a Closing Agent. Your Closing Agent will put together two preliminary packets: a Deed Packet and Buyer Documents. These packets will then be sent to the clients’ respective realtors or directly to the clients (if unrepresented) to get reviewed and signed prior to closing. Getting the preliminary packets signed and returned well in advance can help make the process smoother as we sometimes experience delays in the process of getting payoff instructions from lien holders.

Invoices and Payoffs

Once both of the preliminary packets have been sent out, the Closing Agent begins working on the preliminary settlement statements. With a cash transaction this can mean closing as soon as the deed packet and buyer docs have been returned, we receive any invoices and payoffs we need to obtain, and the buyer and seller are both ready to close. For a transaction that is being financed the process is a little longer. The lender has to disclose fees three days prior to closing, we need have underwriter approval or a “clear to close” status, and the bank has to have the property appraisal back.

Closing

Once we have everything in our office we need and the lender, if there is one, has received approval to close as well –what’s next? We will set up a time for closing either at the bank or in our office.

Cash Sale Closing

Buyers and Sellers may sign all their final documents electronically and certified funds can either be wired or dropped off at one of our offices.  After disbursement and recording the deed, the transaction is complete!

Financed Closing

When there is a mortgage involved, we ask you block off about an hour for closing as there are several documents to work through and sign. Once signing is complete, we will send the loan packet to the lender for funding authorization. Once we have authorization and all funds, we will disburse, record the deed and mortgage, and the transaction is complete.

We strive to make the closing process as smooth and easy (and quick) as we can.  Hopefully this gives you better picture of the timing of your unique transactions. We are here to facilitate everything and take the pressure off you and your clients. Please feel free to give us a call with any questions you have.

Tips and Tricks for Submitting a New Order

How do I submit a new order and what info do I need?

Here at Tallgrass Title we are always happy to get new orders started for you and hope to make it as easy as possible.  To do this, we offer three simple ways to submit new orders or ask questions. Whether it be a contract, refinance, informational report, or preliminary title, any of these methods should cover you!

Email or Fax

A simple way to contact us is through email. A quick email to order@tallgrasstitleks.com is all it takes to get us started.  Whether it’s an order, a simple question, or preliminary title you are just getting started, we can get things going for you with minimal information. All it takes is a quick email.

We can also receive new orders through fax at (785)456–8581. Just send over your contract or title order form and we will get a file started for you!

Our Website

We can also receive new orders through our website: tallgrasstitleks.com! All it takes is to go to the website and follow the link on the main page to Submit Order or follow the Services drop down and click on “Get Started”.

This will lead you to an online fillable order form. Just fill this in, to the best of your ability, and hit submit at the bottom. The fields marked with an * will help guide you through required information.

We will receive your order like this and get a file started for you.

Just remember to include your name and contact information so we can contact you with any questions!

PaperlessCloser

Another way to submit a new order to us is through PaperlessCloser. Access to this program can be found on the main page of our website or through the Client Login drop down. This will direct you to the log on for PaperlessCloser. Once logged in there will be a button for New Order in the bottom right corner.

Fill in the fields with your information and hit Add Order. This will send your order directly to our system so we can get it started for you.

We can get pretty much anything started with an address or current owner so don’t let the details slow you down; feel free to submit what you have, and we will help you with the rest.  However, if you can provide information regarding the buyer or sellers marital status, that will help us immensely in the initial stages! For more information on placing orders or all things title insurance, feel free to give us a call or send an email! We are so happy to help.

Construction Hold-Open Commitments

The 2020 residential building season is now upon us!   Building season brings construction loans and the title concerns that come with this type of financing.   There can be concerns about the duplication of title services and costs that come along with it as well as insuring that the title to the real estate does not collect liens and other title issues prior to permanent financing.   At Tallgrass Title, we are pleased to offer a “construction hold-open” type commitment to assist in the construction of residential property.

Tallgrass Title is proud to say that we can assist in this area!

Q:  How is residential construction financed?

A:  People constructing a home will typically borrow money in order to finance the construction with a “construction loan.”  A construction loan is short term financing of real estate construction.  Generally, a construction loan is followed by long term financing called an “End Loan” that is issued upon completion of improvements.

Q:  Do both loans need title insurance?

A:  Because of the nature of a construction loan, Lenders are often concerned about the length of time a commitment is valid from its issuance.  Commonly, the commitment expires before the construction can be completed and  before going to end loan. To solve this issue, lenders will pay for a full title policy on the construction loan and then again on the end-loan.  The downside is that this creates duplicated costs.

How we can help:

Tallgrass Title is the only title insurance company in the area that offers a “Construction Hold-Open Commitment.”  A Construction Hold Open Commitment provides periodic updates of the construction loan commitment every 120 days keeping the title coverage valid until the end loan is closed.  Therefore, the costs are not duplicated between the construction loan and the end loan.

How to request:

Simply order a Construction Hold-Open Commitment from Tallgrass Title and we will perform the initial search and issue a Commitment for a $200 fee.  The Construction Hold-Open Commitment is then valid for 120 days from the Commitment Date and can be renewed for an additional 120 days with an update. We will perform two updates as part of the initial fee.  We will typically send out an update reminder when the expiration date is near. However, we do not perform updates without a request from the lender. After the second update, if further updates are required there will be an additional $50 fee per update. Construction Hold-opens can remain open indefinitely with the appropriate updates.

When the construction is complete and the mortgage is ready to go to End Loan or final policy we will do a final update at no additional charge. When the Final Mortgage is ready to be filed we collect the Premium and any Endorsement fees and record the New Mortgage. Our office must record the Mortgage and any other required documents with the Register of Deeds Office to ensure that the title is free and clear of any possible new liens. When the recorded documents come back from the county and all the requirements are met we will issue the Policy.

For those of you that use our Paperless Closer system, simply note that the loan is for new construction and type into the notes that you want a Construction Hold-Open Commitment.  If you prefer to email the order, please note the request on your order form.

Please contact our office if you have any questions!  We look forward to assisting you in the 2020 building season. 

MHK Office

 

As most of you know, we recently opened an office in MHK. We had the opportunity to talk a little about our new adventure! Check out the video below!

 

 

Thank you Manhattan!

Last week we officially opened a Manhattan, Kansas office.  This move follows requests from real estate professionals to locate an office to better serve their regional needs.  You asked, we listened!  Our Manhattan office (TGT MHK) is located at 210 N. 4th, Suite A in the Hartford Building.  We are fully staffed Monday – Friday from 8:00 am to 5:00pm and are open over the noon hour.  A drop box is located on the front of the building for after hours drop-offs.  Both the Wamego and Manhattan offices are equipped to deal with closings, escrow deliveries, deed packet deliveries and notary services.  Additionally, TGT MHK will continue to offer free courier service in the Manhattan area as well as mobile closings.  We are here to serve your needs!

At Tallgrass Title, we love feedback about how we may better serve your needs.  Feel free to speak with any of our title experts about your needs as a real estate professional.