FAQ's:
Q. What is a closing?
A. A closing (sometimes referred to as closing of escrow or settlement) is the process taken by the title company in order to properly convey the subject property from the seller to the buyer and/or properly execute the mortgage loan documents of the buyer's lender.
Q. Is there a difference between "closing" and "escrow"?
A. Practically, no. In today's title industry, the term escrow simply means the depositing with the escrow agent (title company) of anything pertaining to the real estate transaction, such as the real estate contract, earnest money, documents required for the transaction, etc., which are to be executed, disbursed and/or delivered through the closing by the escrow agent (title company) when all conditions of the real estate transaction (as set out by the real estate contract, title insurance commitment and lender's closing instructions) have been met.
Q. Who chooses the title company?
A. In Arkansas, the buyer and seller have the right to choose their closing agent (title company). The parties may use the same closing agent, or they may use separate closing agencies.
Q. What are my closing costs?
A. Both the seller and the buyer will incur costs with the closing. Some typical costs paid by the seller in Arkansas are the Realtor's commission, a closing fee to the title company, a title insurance premium to the title company, recording fees and 1/2 of the deed stamp tax. Dependent upon the title company, you may also incur document preparation fees, attorney fees or notary fees. The real estate contract or the circumstances may also cause other miscellaneous fees such as overnight delivery, termite transfer, survey or repairs. Some typical costs paid by the buyer in Arkansas are a closing fee to the title company, a title insurance premium to the title company (for a loan policy if buyer has a lender), lender fees (ie., origination fee, discount points, credit report, appraisal, processing fee and assumption fee), recording fees and 1/2 of the deed stamp tax. The lender may also require that certain sums be paid into a borrower's escrow for the payment of future taxes, homeowner's insurance premiums and mortgage insurance premiums. Do not be hesitant to ask your title company about your costs.
Q. When will the title company contact me or when can I contact the title company?
A. The title company should contact you within a few days of receiving the closing (unless you talked directly to the title company when the order was placed with the title company). Thereafter, contact from the title company will depend on the date your closing is scheduled. However, you may contact the title company at any time. When you first talk to the title company, be sure you give them good contact information. And, if you are the seller and have a current mortgage on your property, be sure to give the title company all the information you have on the lender (name, address, telephone number, loan number, etc.).
Q. What should I bring to closing?
A. Good question! Every party to the closing should bring their current drivers license or an acceptable form of picture identification. If you are married, you should bring your spouse. If you are the agent of a corporation, limited liability company, trust, etc., ask your title company in advance of closing what you should bring to closing.
Q. Can the title company give me legal or tax advice?
A. No. You should receive legal advice only from a licensed attorney and tax advice only from a qualified accountant or tax preparer. The title company may have an attorney or accountant on its staff. However, that attorney or accountant is the title company's attorney or accountant only. You should neither seek nor expect advise from that person.
Q. What is a closing protection letter?
A. A closing protection letter is issued by the title company's underwriter and is a form of additional protection from the underwriter. The charge in Arkansas for a closing protection letter is presently $25.00. You have the right to decide whether a closing protection letter is issued for you. The title company should ask you if you want the closing protection letter. However, if you are the buyer and have a lender, your lender may require a closing protection letter for which you will be charged notwithstanding your personal decision regarding a closing protection letter.
Q. What is title insurance and why is it needed?
A. Title insurance is an insurance product issued through the title company from a title insurance company underwriter (such as First American Title Insurance Company). Before issuing the title insurance commitment, the title company searches the chain of title to the subject property for at least the past thirty years. The title commitment sets forth the action that should be taken through your closing in order for good title to be conveyed from a seller to a buyer. The final title insurance policy insures that you have such good title, subject only to those specific matters set forth in your policy (such as the mortgage lien or your lender).
Q. What is the chain of title?
A. The chain of title is the record of the subject property as recorded at the Circuit Court Clerk's Office (Ex-Officio Recorder) in the county in which the subject property is located. The chain begins with the first recorded document (probably the U.S. Patent where the United States conveyed the property to the State of Arkansas) and continues with every document recorded thereafter affecting title to the subject property up to the present date.
Q. What is fee simple?
A. Fee simple refers to the highest and best degree of ownerhsip which a person can have in real estate.
Q. I have an old abstract on my property. Is their a difference between an abstract and a title policy?
A. Yes. An abstract is only a certified copy of all the recorded documents for the subject property. It does not "guarantee" title unless you have an abstracter re-certify the abstract to the present date and take that abstract to an attorney for an attorney's examination and opinion. A title insurance policy is a policy of insurance insuring that the buyer has good title to the subject property subject only to the exceptions set out in the policy, if any. A title company must have a title insurance agent licensed by the Arkansas Insurance Department in order to issue title insurance.
Q. Is the search of the subject property important so long as I get a title insurance policy?
A. Yes, the search perfomed by the title company is very important. Ask your title company about the experience of its title insurance agents. At Ozark Title Services, Inc., we have licensed title agents with over 85 years of combined experience. You want a title policy, but you also want to know that it was based on a good search so that any existing problems were found and corrected. A title policy based on a good search not only "insures" your title, but also "assures" your good title.
Q. What is the difference between a warranty deed and a quitclaim deed?
A. A warranty deed has a covenant of warranty clause (and other covenants) that states the the seller is actually warranting that seller has good title to the subject property and that good title is what seller is conveying to buyer. Suit may be filed against a grantor for breach of warranty. A quitclaim deed simply disclaims the interest of the seller in favor of the buyer (and surrenders any such interest to the buyer), whatever that interest may be. No warranties or other covenants are made in a quitclaim deed.
Q. Can I use a power of attorney at closing?
A. Yes. But, if you plan to do so, you need to so advise the title company in advance of the closing date. The title company will want to be certain the power of attorney has been recorded in the county of the subject property and, if not, plan to so record that power of attorney as a condition of closing. The title company will also want to read the power of attorney to be certain it contains language required for the named agent to act for the principal. If you want to use a power of attorney, but do not already have one, you should advise the title company as soon as possible prior to the closing date.
Q. I have not paid my taxes and some other fees assessed against the subject property. Should I go pay those on my way to the closing?
A. Absolutely not. If you have not paid taxes or other fees well in advance of the closing, do not do so before the closing. The title company will plan to collect those sums at closing. If you pay them shortly before closing, the closing agent's settlement statement will not be correct. If you have concern about any such fees, call your title company and discuss your questions.
Q. Can I write a personal check at closing?
A. No. Arkansas has a good funds law that requires that the title company be certain that it is collecting good funds if it involves $500.00 or more. You should expect to be required to bring a cashier's check from your bank or you may wire transfer the funds to the title company. A money market check or other similar checks from a retirement fund, etc., are not considered "good funds". Please do not take this requirement personally. The title company is simply complying with the law.
NOTE: These FAQ's are frequently presented to our closers. The answers herein are based on our experience. This is some of the information that is helpful to our closers if you know these FAQ's when dealing with our office. If you have dealings with other title companies, their preferences and answers may vary. These FAQ's are not intended to be and should not be taken as legal advise. If one needs legal advise regarding one or more of these questions, then the advise of an attorney should be obtained.