When Escrow proceeds to close a sale transaction or do a refinance the title issues must be cleared up prior to closing the sale or putting a new loan in place. They do this by reading the title report and determining what needs to be cleared up and what stays.
How you may ask do they determine this? Well there are standard paragraphs in a title report that will more than likely be there and never change. Some examples of those paragraphs are the legal description, CCR’s, easements and property taxes. Things that change quite often are ownership vesting, judgments, divorces and deeds of trust.
Some of the biggest challenges that an escrow officer face when clearing the title are deeds of trusts that have not been reconveyed. A deed of trust is recorded on the title when an owner takes out a loan on their property; the lender requires the owner to purchase a loan policy from the title company that will insure that lender a clean title and put them in first lien position to be paid. This will insure that the lender will either be paid or have the right to foreclose on the property if payment isn’t made. When a property is sold or refinanced the existing loan is paid off and a reconveyance document is filed showing that the loan is paid. Sometimes the lenders don’t get to the reconveyance right away or it is never completed therefore that lien will still appear on the title report and it is escrow’s job to track down the lender and try to get the loan reconveyed and removed from the title.
When a property has a title search done on it the title company will run the names of the incoming parties and exiting parties through a database system that reports any judgments or divorces that may be pertinent to those parties. It is up to the escrow officer to make sure those items are dealt with; some common issues are unpaid child support or a civil case judgment with a monetary payout due by the person or a divorce decree that has one spouse owing the other a monetary payment or property. All of these things are taken care of prior to the closing giving the title and the person both a clean slate. Other types of liens on a property could be a mechanics lien from an unpaid contractor or a utility lien from unpaid utility bills.
Some of these issues are very easy to clear up and have removed from the title report; others are more cumbersome and take some time and sometimes are never cleared up and other measures have to be taken. Sometimes you may be asked to fill out an ID affidavit; this is asked for so title can see if you are the person the lien or judgment effects. More times than not if you have a common name like Johnson or Smith several items will show up on the title report and the ID affidavit usually will show that you are not that particular person with the judgment or lien.
So remember when you are buying or selling a property or just doing a refinance there are things to deal with on the title that escrow gets cleaned up. The more information you can provide escrow the easier it will be to close the transaction.
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