While most of us are familiar with insurance as a whole, there are a few specific differences that make title insurance a bit confusing. Let’s take a look at what sets title insurance apart from other forms of insurance and how it will benefit you.

Title insurance is a bit different from other insurances you will encounter, like life insurance or home insurance. While most insurances protect you against potential future events, title insurance protects you from the past events and from previous owners of the property. Specifically, title insurance protects against a variety of issues, sometimes called “defects”. Defects include another person claiming ownership interest, fraud, forgery, encroachment, improperly-recorded documents, and several other potential hiccups specified in the insurance policy.

The title insurance policy is created during the transaction of the property in question. A title search is conducted during escrow, which results in a preliminary commitment for title insurance that is issued to the customer for approval. After approval and the closing of escrow, the actual title insurance policy is created, so all parties are aware of the policy’s specifics. The policy will protect the buyer, seller, and lender from defects as specified in the policy.

Another key difference between title insurance and other forms of insurance is that title insurance is paid for once, at the close of escrow, instead of via monthly or annual premiums.

When choosing a title insurance company, it’s encouraged to shop around, comparing fees and services. Your lender or real estate professional may recommend a specific company, but it’s important to find a company that is right for you.

If you have a question about title insurance in the Seattle area let me know. I may be able to help. If not I will point you in the right direction.

David Warren
Managing Broker
METROPOLIST

Simply put, earnest money is a form of collateral paid by a buyer as a early deposit to show intent and good faith to a seller for taking the seller’s home off the market while the buyer does their due diligence on inspection of the property and arranging financing if needed. In the Seattle area earnest money deposits are generally, 1-3% of the purchase price of the home, although buyer and seller can come to any agreement on amount. Earnest money is negotiable. In the current “seller’s” market its not uncommon to see earnest money deposits of 5% (or more) offered by competitive home buyers.

Again, the reason for providing earnest money is to show that the buyer is serious in their commitment to purchase the property. Earnest money deposits are usually made immediately upon mutual acceptance of an agreement and held in a trust or escrow account until the transaction is finalized.

At mutual acceptance the property is taken off the market by the seller to allow time for buyer to inspect the home before closing the sale. If the buyer is also financing the purchase the buyer will need to secure a mortgage and the lender of the loan will want to appraise the property.

If the sale goes through, the earnest money is typically applied towards buyer’s closing costs and down payment due at closing. If the sale does not go through, the buyer may or may not be able to reclaim their earnest money, depending on the phrasing of the sale contract. Backing out for reasons covered in the contract (failed contingencies such as unfavorable discovery from inspection being a common reason) will likely allow the buyer to reclaim their earnest money, while backing out for reasons not covered will generally forfeit the good faith deposit.

If you have a question about earnest money or Seattle real estate in general please contact me. I’m always happy to answer your questions.

David Warren
Managing Broker
Metropolist

“Escrow” is a term that comes up frequently when buying and selling property, or in transactions where large sums of money are involved. Simply put, escrow is when a third party (someone other than the buyer or the seller) holds and regulates payment until both sides are satisfied. This third party, usually an escrow company, is impartial to the transaction—they don’t favor the buyer or the seller. Instead, their job is to make sure both the buyer and the seller complete their sides of the transaction agreement, and are satisfied with the results. Using an escrow company helps protect the assets and interests of both sides.

Example: Suki is selling her house in Seattle to Ben. Suki and Ben come to an agreement on price, terms and any the conditions that need to be met for the sale (such as inspections and appraisal). A signed purchase and sale agreement is then delivered to an escrow officer, who keeps track of the contract and holds payment (such as earnest money) until the contract has been satisfied. Once both Suki and Ben have fulfilled their ends of the agreement, and they are both pleased with the results, the ownership of the Seattle home is then transferred or conveyed from Suki to Ben, and escrow closes, allowing payment to be completed.

There are several reputable escrow companies that can be found online or locally, but it’s often a good idea to ask your real estate agent who they recommend.

If you have a real estate related question please ask. I’m happy to help in anyway that I can.

David Warren
Metropolist
425-760-8285
david@metropolistgroup.com