UNDERSTANDING TITLE INSURANCE
THE PARTIES IN A TRANSACTION
There are few business transactions with more importance than those related
to the sale and purchase of real estate. The purchase of a home is usually the
largest, single expenditure most families will ever make. To these families, we
at Old Republic Title play a critical role in the real estate transaction.
In most cases, a property owner will approach a real estate agent and
offer a property for sale. The agent will then advertise the property
and conduct a search for potential buyers. Generally, a number of
potential buyers will respond to the agent's listing, depending upon
real estate market conditions and general economic conditions at the
time. The agent, working with the client, then determines which of the
potential buyers is financially qualified to enter into sale price
negotiations with the property owner.
Once a qualified buyer is found and a sale of property is arranged for
and completed, the agent is compensated in the form of a commission.
This commission is normally paid by the property seller and is based on
a percentage of the final sale price of the property. The actual dollar
amount of the commission, as well as the general terms of the agent's
services, are specified in a listing contract or
Once the buyer and seller have agreed on a purchase price, they enter
into a Purchase Agreement or Contract. The contract sets out the terms
of the agreement such as price, closing date, contingencies, etc. It is
recommended that the parties have the advice of their lawyers before
signing the Contract, since once it is executed it defines the terms of
The parties' attorneys will continue to provide legal advice to their
respective clients until the real estate transaction is completed.
Most people do not have enough cash to purchase property on an all-cash
basis and must therefore look toward one of the many sources of
financing available today. The basic arrangement is that someone will
lend the buyer enough money to purchase the property under certain
conditions. The conditions require the purchaser to repay the monies
according to a known repayment schedule, and pledge the property as
security for the debt.
When you borrow money, the lender is in fact making an investment in
which the lender will earn interest. Your payments will usually be made
on a monthly basis and are calculated so that the entire amount of
principal and interest due is repaid in a fixed number of years. If the
entire debt will not be paid in this time (i.e., fully "amortized") the
total amount left to be paid is called a "balloon" payment.
The lender first processes and underwrites the buyer's application.
This involves ordering credit reports, appraisals, verifications of
salary, verification of debts, and possible investor and private
mortgage insurance company approval. When loan approval appears likely,
is ordered, often by the real estate agent.