Is Owner’s Title Insurance Required In Georgia?

Although title insurance is not required by law in Georgia, it is always a good idea to have one before the buyer and seller sign a contract.

Who pays for owner’s title insurance in Georgia?

A home purchase is one of the most important financial transactions most people will ever make, and as a result, it is also one of the most stressful. However, learning about the process will help you relax and enjoy your new home sooner by reducing stress and ensuring a smooth closure.

Step 1: Signing the Contract

When the buyer and seller sign the final purchase and sale contract in Georgia, the real estate closing process begins. The contract specifies the most important details, such as the purchase price, earnest money amount, closing date, any seller-paid closing charges, and any contingencies (such as financing or appraisal contingencies.)

The earnest money is paid by the buyer. Earnest money is normally provided by the buyer and retained by one of the real estate agents or the closing attorney.

In Georgia, all real estate transactions must be closed by a qualified Georgia attorney, unlike in many other states where title firms handle escrow and closing.

The contract is forwarded to the buyer’s lender and the closing attorney. A title order, which is the lender’s instructions to the closing attorney to search title to the property and represent the lender at closing, is also provided by the buyer’s lender. The buyer will collaborate with the lender to submit financial information necessary to execute the transaction. Because the information required by each lender differs, work closely with them to avoid any delays. The lender will also request that the closing attorney do a title search. All real estate transactions in Georgia must be closed by a licensed Georgia attorney, not a title firm. (Of course, if there is no need for financing, the contract will be delivered directly to the closing attorney.)

In Georgia, all real estate transactions must be closed by a qualified Georgia attorney, unlike in many other states where title firms handle escrow and closing. In most transactions, only one attorney is involved, and that attorney represents either the buyer’s lender in a lender-funded transaction or the buyer in a cash sale. Both the buyer and the seller have the option of hiring their own attorney to analyze paperwork and represent them at the closing. While the closing attorney may represent the lender, they are ethically required to treat all unrepresented parties fairly and will explain the paperwork in detail to both parties. Even though the attorney is representing the lender at closing, the buyer has the option of selecting the same counsel, as long as the attorney meets the lender’s requirements.

Expect the closure to take roughly 30 to 45 days from the time all parties sign the contract. The buyer, buyer’s real estate agent, buyer’s lender, and closing attorney will all be working towards the closing during that period.

Step 2: Due Diligence Period

Most purchase and sale contracts include a due diligence period during which the buyer can do any property inspections he or she want. Buyers are recommended to employ the services of a professional. This process might be aided by your real estate agent so that it is done within the contract’s timeframe. A home inspector can assess the property’s condition and produce a comprehensive report on their findings. A termite examination is also performed by many buyers. If the property inspection reveals any necessary repairs or other undesirable finds, the buyer normally has three options: terminate the contract and obtain their earnest money back, negotiate for repairs or a price change, or accept the property as-is.

Step 3: Property Appraisal

The lender will order a property appraisal to assess the property’s market worth once any due diligence time has expired. The lender may refuse to accept the loan if the home does not appraise for the purchase price. (An appraisal contingency in the contract, which allows the buyer to terminate the contract if the home does not appraise for the purchase price, is a smart idea in this case.)

Step 4: Title Search

The closing attorney has two main responsibilities: 1) supervise the conveyance of the property in accordance with the contract provisions, and 2) verify that the buyer’s lender has first lien position while recording the new security deed (similar to a mortgage or deed of trust used in other states.) As a result, the closing attorney must do a title search to ensure that nothing stands in the way of the lender’s first lien position, prepare the closing paperwork, and coordinate the closing ceremony.

The closing attorney will produce a title commitment for the lender and buyer based on the results of the title search, outlining the terms under which the attorney will offer title insurance. Title insurance plans are divided into two categories. Each of these is normally paid at closing by the buyer.

1) Title insurance for the lender. A lender will normally require this to verify that the lender has first lien status on the property.

2) Title insurance for the owner. This safeguards the buyer by guaranteeing that the title is marketable. It is a one-time premium that is paid upon closing. The closing attorney might go over the different types of hazards that the insurance covers in further detail.

Title clearance may be performed by the closing attorney. There could be ancient security deeds that were never canceled of record, for example. The closing attorney is also in charge of acquiring payback amounts for any outstanding debts, taxes, homeowner’s association dues, or any liens or judgements against the property. To ensure that title to the property is correctly passed from seller to buyer, these items must be paid at the time of closing.

The lender will tell the parties that the loan is “clear to close” and ask the closing attorney to schedule the closing ceremony once all of the lender’s loan criteria have been met.

Step 5: Closing Ceremony

The closing attorney works with the parties and their agents to schedule the closing ceremony after being notified by the lender. If someone is unable to attend, notify the closing attorney in advance so that the attorney can make alternate arrangements, such as preparing a power of attorney.

The lender will send the buyer a closing disclosure three business days before the closing date, including the loan details, including monthly payments, closing charges, and the money required at closing. Before the closing, study the disclosure and ask your lender any questions you may have. The buyer will wire the necessary cash to the closing attorney’s trust account prior to the closing.

Typically, the closing ceremony lasts one hour or fewer. The buyer must present a valid driver’s license or other government-issued identity. A checkbook is also a good idea in case the closing disclosure is altered slightly. The attorney will explain the closing documents to the buyer and seller and answer any questions they may have during the closure. The attorney’s trust account is used to collect and disperse all closing payments.

The attorney records both the deed conveying the property and the lender’s security deed after the closing. The original deed can take up to four weeks to be returned to the buyer. The lender’s and owner’s title insurance policies are also issued by the attorney.

The selection of a real estate agent, lender, and closing attorney is critical, and it can make all the difference in assuring a smooth transaction throughout the closing process.

Sherman & Phalen, LLC’s William Phalen is a partner in the business. Sherman & Phalen, LLC has been conducting residential and commercial real estate closings in Georgia, Florida, and South Carolina for over two decades. He served on the Executive Board of the State Bar of Georgia’s Real Property Law Section and is a previous president of the Georgia Real Estate Closing Attorneys Association. Mr. Phalen has worked on legislative issues such as defining and policing the unauthorized practice of law when performing real estate transactions, the licensing of attorneys with the insurance commissioner’s office, and the method of issuing liens for unpaid water bills, among others, as a board member of both organizations.

Is an owner’s title insurance policy necessary?

“The lender almost always requires lender’s title insurance for their protection, but owner’s title insurance is completely voluntary,” says Matt Medaries, vice president and general counsel at Navy Federal Title Services, the credit union’s title insurance arm.

However, in addition to the lender’s title insurance, you’ll probably want to purchase an owner’s title insurance coverage. This is why.

Why should I buy owner’s title insurance?

If someone sues the homeowner and claims they have a claim against the home from before the person purchased it, owner’s title insurance protects the homeowner. You should consider purchasing an owner’s title insurance policy to protect your financial investment in the home.

Does seller pay title insurance in Georgia?

A title agent would usually undertake a third-party title search before transferring real estate to ensure that there are no existing liens or encumbrances on the property. Mortgages, mechanics liens, outstanding judgements, code infractions, and utility liens are examples of “clouds” on clear title. Before the property can be sold, any such encumbrances must be resolved. The cost of a title examination is normally between $200 and $400.

A third party will certify the chain of title during the title examination. The chain of title examines the property’s history from the first owner to the current owner. This investigation confirms that the property was sold correctly each time it was transferred and that the title is clear.

The title business can give title insurance after the test is completed. This shields the new homeowners from any claims or title flaws that the inspection may have missed. The cost of title insurance is determined by the home’s purchase price, and who pays for it is discussed between the buyer and the seller. It may be usual for the buyer or seller to pay for title insurance, depending on the Georgia county where the property is located. Ensure that this is addressed and resolved during the negotiation process.

What is seller responsible for at closing?

A seller might anticipate to pay a number of important closing charges, such as real estate agent commissions, as well as transfer taxes and fees. Closing fees for a seller might be anywhere between 6% and 10% of the sale price.

What is the difference between lenders title insurance and owner’s title insurance?

Owner’s title insurance protects the owner from claims against the title that date back when the property was purchased, whereas lender’s title insurance safeguards the lender. The main distinction between the two is this. The coverage given in many circumstances will be identical, owing to the fact that the basic types of difficulties covered by this insurance are conventional, and include the following:

Some homeowner’s insurance policies include options for additional coverage in a range of situations. This additional coverage comes at a cost, but if there is a major risk associated with purchasing the home for whatever reason, upgrading the coverage may be justified. In the transaction documents, the cost of the lender’s insurance will be disclosed.

Why does seller pay for Owner’s title insurance?

Title Insurance and Fees – Title insurance is designed to safeguard and limit any risk of title flaws, such as fraud, that may exist in the title but are not disclosed or discovered prior to the purchase of the property.

Is title insurance a ripoff?

In the mid-nineteenth century, title insurance was invented as a mechanism to ensure that the person selling you land actually owned it.

Today, title insurance protects against discrepancies in public documents, unknown liens or easements, and the disappearance of heirs. Homebuyers can get title insurance to protect themselves, but they typically do so to protect their mortgage lender. Most lenders do not purchase title insurance themselves; instead, they require borrowers to do it.

Unlike health or car insurance, title insurance protects against an occurrence that occurred in the past, thus these faults may be discovered and addressed with normal (and low-cost) due diligence owing to modern-day digital record-keeping.

The ease with which businesses can avoid a claim is reflected in the claim rates. While home and auto insurance companies can pay up to 80% of their premium dollars in claims, title insurers only pay about 3% to 4% of their premium dollars in claims.

That means that 95% of their revenue is spent on running expenses, which are relatively low in comparison to the costs of insuring a title and paying claims, but which rise and decrease in lockstep with revenue.

Because the title insurance market is dominated by four businesses, it has proven difficult to change: First American Title, Fidelity, Stewart, and Old Republic control between 85 and 90 percent of the market.

The majority of title insurance pricing processes are controlled by these companies. State-by-state title insurance prices, which are usually expressed in dollars per $1,000 of mortgage debt, vary. Twenty states employ a “file and use” system, in which title insurers set their own rates and the state has the right to reject them, though they rarely do. Title insurers in sixteen states are required to obtain prior permission for the premiums they charge. In ten states, title insurance prices are not regulated at all.

What is title owner policy optional?

Lender’s title insurance (sometimes known as a loan policy) and owner’s title insurance are the two types of title insurance.

The financial interests of the corporation that issues the mortgage are protected by a lender’s title insurance policy (just like mortgage insurance does). It ensures that the lender has priority over all other liens on the property. Any time you take out a mortgage, whether you’re buying a property or refinancing, you’ll need to obtain lender’s title insurance. According to Prairie Title in Oak Park, Illinois, if your loan is less than 10 years old, you may be eligible for a discount when refinancing.

The lender’s title policy coverage must be at least as much as the mortgage principle, according to major mortgage investors Fannie Mae and Freddie Mac, who regularly buy home loans from lenders after closing. The lender’s coverage decreases as you pay down your mortgage principal.

The homebuyer is protected by an owner’s title insurance coverage. The coverage level for an owner’s policy is normally equal to the purchase price, and it stays the same for as long as you or your heirs hold the home. This is an optional policy that only needs to be purchased once.

What does owner’s title insurance protect against?

Your owner’s title insurance coverage is a one-time investment that protects you against financial loss due to a title problem. The policy covers your legal bills and court costs if you’re sued by someone who claims your deed is fake and the property belongs to them. The policy will cover you if the state comes after you for unpaid property taxes from the past. These are usually problems that you have no way of knowing about and are not to blame for, but which could cost you a lot of money to solve.

There have been a number of instances where homeowners have benefited from getting title insurance. Listed below are a few examples:

  • The power company told the homeowner of an old easement that allowed them to put up an overhead power line and poles on a portion of the land. The easement, which extended back many years, was not uncovered during the title search. The power line installation would detract from the home’s value by obstructing the view. The difference between the home’s value with and without the electricity line was covered by owner’s title insurance.
  • A man comes to your door and claims ownership of your home. You purchased the property two years ago. The man’s son was meant to look after the property while his father was away on business. Instead, the son sold the land by forging his father’s signature. You don’t have to worry about the legal difficulty since title insurance compensates the father for the property’s worth and the insurance company pursues the son for restitution.
  • You learn that the person who owned your property three decades ago died unexpectedly and with no heirs. The land was sold by the state, and it has subsequently had two owners. Now, a potential heir has spoken up, claiming that the property should be theirs. Your title insurance policy will cover your legal bills, deal with any legal concerns, and compensate any losses.
  • Your new neighbor argues that a piece of your yard is truly theirs, based on an older survey that reveals a different property boundary. Legal fees and, if the neighbor is determined to be correct, the value of the property you lost are covered by title insurance.

Most of the time, there is an undiscovered lien on the property ranging from a few hundred dollars to several thousand dollars. If it wasn’t discovered during a title search, title insurance will cover it.