Question: Who can provide escrow/closing/settlement services?

Answer:  This is dictated by state law and can vary greatly from state to state.  The list includes title insurance companies, underwritten title companies, independent escrow companies, real estate brokers, attorneys, and financial institutions such as banks and savings and loan associations.

Question: We are purchasing our home from family/friends.  Why do we need title insurance when we know that they wouldn’t cheat us?

Answer: A title search could disclose many things such as tax liens or easements, the existence of which might not be known to the seller.  A well intentioned, but unknowing, seller might unintentionally convey real property to you that has undisclosed defects.  Also, if a loan is to be obtained or assumed, the lender will require an escrow and a title policy.

Question: What is a reconveyance?

Answer:  A reconveyance is a document used to transfer the title from a trustee to the equitable owner of the real estate, when the title has been held as collateral for the for the repayment of a debt.  It is used when a note secured by a trust deed (or deed of trust) has been paid in full.  It is also referred to as a deed of reconveyance.  It serves the same purpose as a release of mortgage when a mortgage has been used as the security instrument.

Question: What is a reserve account, and why do I need one?

Answer: A reserve account (also called an escrow account or an impound account) is an account held by a lender and established at the time of the closing of a loan for the purpose of paying real property taxes, homeowner’s policy premiums and other expenses of the property as they come due.  Contributions are made to it monthly, along with the principal and interest payment.  The lender generally will not require that a reserve account be established unless the loan-to-value ratio exceeds 80%.  If the loan to value ratio is less than 80%, the establishment of a reserve account is at the option of the borrower.  The lender must analyze reserve accounts at least annually to assure that sufficient funds will exist at the time that tax and insurance premium payments become due.  Also, lenders are required to see that excess funds do not accumulate in that account.

Question: I found out some time ago that the title companies who underwrote my title insurance have gone out of business, and I was unable to locate any successors who subsequently might have taken over the company (the title dates from the 1960s). I am now wondering whether my title insurance is still valid.  Also, does the title insurance cover the house we built on the insured land (subsequent to taking out the policy), or does title insurance typically cover only the land on which the building sits?

Answer: It sounds like your title insurance policy is no longer in effect. Actually, it may still be technically valid, but if there is no one to handle or pay a claim on your behalf, it is of little value. If the title insurer of the policy is out of business and no other company has taken on the responsibility of these prior policies, then there is no one to handle a claim should one arise. Have you checked with the Department of Insurance? When a title insurer goes out of business, the Department becomes involved in figuring out what happens with the policy holders. They may even have created a receivership to handle inquiries like yours and assist you in determining whether or not there was a successor title insurer to whom you can submit your future claims- should you have any, that is. By the way, having title to the property since the 1960's without any problems is a good sign! Typically, problems arise in the first few years of ownership. However your second question brings up another topic. An addition of a house on a once-vacant piece of property would not be usually covered by the old policy even if you were to find a successor title insurer. For that reason, you may want to inquire with the new title insurer for an upgraded/ new policy to include the residence.