When you are in the process of buying a home, you will need a number of people and services to help you inspect and protect the home, and close on the purchase. The buyer and seller need to agree on the title company who will close the transaction. If you are unfamiliar with the various required service providers, your real estate broker may be able to make some helpful recommendations.
One of the first service providers that you will encounter in a transaction is the title company. In some states, these are called escrow or settlement companies, and they will provide a title commitment and may even hold the earnest money. Once you are ready to close, they will provide the title officer to help you sign all the require documents, and assure that all the requirements for the title insurance commitment have been met. Since this third party is critical to a successful closing, it is important that you trust in the service being provided by these companies. The quality of service can vary greatly, so do not be afraid to be picky. Unfortunately, if you are buying a bank-owned home, then the lender usually selects the title company. Of course, under the Real Estate Settlement and Procedures Act (RESPA), the buyer may select the insurance company from whom you buy title insurance.
Remember that everything in real estate is negotiable, including who provides the title insurance, where you close, and who holds the earnest money. Title insurance is one of the most critical aspects to buying a home. Do yourself a favor, make sure you completely understand the title insurance policy you are obtaining, and know what the exceptions are to the title insurance policy. One of the most misunderstood aspects of title insurance is the so-called Owner’s Extended Coverage (OEC). It is very inexpensive, and it provides coverage over the standard exceptions. You will be doing yourself a great service when you purchase an OEC policy. Make sure your real estate broker requests an OEC policy in the contract. Most often, sellers do not mind paying for the extra cost. Lastly, concerning your title policy, it is always a good idea to have an attorney review your title commitment to be sure there are no surprises in the exceptions.
You will also want to consider whether to obtain a survey or at least an Improvement Location Certificate (ILC). These documents can help you determine if there are any encroachments or other problems with the land. Having a good understand of any issues that could affect your ability to obtain a permit to install a new roof or make changes to your home is very important down the road. It is always a good idea to identify potential pitfalls early on. In addition, the title insurance company may require an ILC in order to issue the title policy.
In addition to a title insurance policy, you will need home owner’s insurance. The type of insurance, quality and cost vary widely. You should obtain a few quotes and compare the features and benefits of the policies.
As part of your offer, you should require a comprehensive home inspection that includes a pest inspection, foundation inspection, condition of the property and the inclusions, along with a well and septic test if you have those features. The companies and individuals who provide these services also vary greatly in the type of service they provide. I have seen more buyers upset after closing when they had a poor inspector than just about any other cause. Choose your inspector carefully. I recommend you choose inspectors affiliated with the America Society of Home Inspectors (ASHI). The inspector will help you under how the systems in your home function, whether everything is working correctly, whether you have any maintenance items that require attention, such as whether there is any dry rot or water damage, among many other things. Again, the inspector is critical because you want to know up front if there any items that may cost you big dollars after closing. Remember that you may ask for reduction in the purchase price or credits to repair items discovered to be deficient in the inspection.