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Reading Title Commitments For Better Closings

Q: What is the most common mistake Realtors (and FSBO parties) make in reviewing a title insurance commitment?

A: They don’t review or read it at all!

Most Realtors are trained not to act as attorney’s or give any legal advice. The Title Commitment is a legal document and advising a client on it could constitute legal advice. In addition, many Realtors and FSBO parties simply don’t know what to look for and, therefore, don’t read the document.

Title Commitments Provide Critical Information

All Realtors should be reviewing the title commitment for certain, important information. A title commitment has three sections or schedules: Schedule A, Schedule B-I Requirements, and Schedule B-II Exceptions. At a minimum, Realtors should be reviewing the following:

Schedule A

The first part of the title commitment provides the names of the proposed insured. This should be your buyers. If it is not, call the title company right away – they might be missing an Amendment or their might be an error in your paperwork.

The Policy Amount should match your purchase price.

The name of the seller should be listed in paragraph 3 as the “fee simple” owner. If the name is different, there may be a title issue such as a deceased individual or spouse that still owns the property, a trust or LLC that has an interest in the property, or some other issue that requires attention.

The land referred to in the policy should match the land being sold. It will be a legal description, not a postal address. Review to make sure it looks right, especially if the property is a Condominium or includes multiple lots.

Schedule B-I Requirements

This portion of the title commitment provides a list of requirements that must be met in order to close. The requirements will call out any unusual issues that must be dealt with at closing. For instance, if the seller is deceased, the Requirements might require a valid Personal Representative to be appointed to sign on behalf of the estate.

In addition, most title companies will include any loan payoffs, taxes, or other liens that must be paid at closing. Some title companies, however, will show those liens in Schedule B-II.

Schedule B-II Exceptions

This section shows all of the title “issues” that are excepted from coverage – in other words, the title company will not insure for these issues. They are usually things like covenants, restrictions and easements. But, at some title companies, seller mortgages and liens will appear in this section. Therefore, it is important to review.

Reviewing is not Advising

Although Realtors should review the title commitment, they should not advise their clients about the legal meaning and effect of this document. That would constitute legal advice and is prohibited under Wisconsin Law. Nevertheless, if the Realtor spots a problem (the wrong seller or buyer or too many Mortgages), that should be brought to the client’s attention with the advice to seek legal counsel.

The title commitment is a critical document that provides all parties and their agents with notice of the current state of title. While Realtors should not make a “legal” review of this document, they should make a thorough review to avoid any closing problems.

 

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Changes to Recording Fees & Social Security Protection

Effective June 25, 2010 the cost to record a real estate document in the County Register of Deeds office will be $30 regardless of the number of pages.

Formerly, the fee was based on the number of pages in a document: $11 for the first page and $2 for each additional page. This old fee structure made it difficult to give exact quotes prior to closing. The new fee will, on average, not add much in total fees and will add certainty to transactions. Lenders and Realtors will be able to give exact quotes for recording fees.

Five dollars of the new fee is designated for the removal of social security numbers from all public documents. The recording fee will revert to $25 upon the earliest of the following 1) the Register of Deeds has successfully redacted all social security numbers from electronic format; 2) January 1, 2012, unless an extension of time is granted by DOA; or 3) January 1, 2015.

New Rules for Correcting Errors in Recorded Documents

Errors in recorded documents are common and unavoidable. Everyone makes mistakes from time to time. It is how we correct those mistakes that separates us.

For over a decade, the tool for correcting a mistake was an “Affidavit of Correction.” If a deed or a mortgage contained an error, the title company or an attorney would record an Affidavit that described the error and showed how it was to be corrected. For instance, if a deed omitted a Buyer’s middle initial, the title company would file an affidavit of correction that stated: “The Deed recorded on May 24th omitted John D. Smith’s middle initial. The Buyer’s correct name is John D. Smith.”

In 2007, the Wisconsin Court of Appeals ruled in Smiljanic v. Niedermeyer, 2007 WI App 182, 737 N.W.2d 436, that using Affidavits of Correction to correct errors is not proper because there is no Statute in Wisconsin that authorizes the use of this tool. This new ruling not only made it much more difficult to correct errors, it called into question all of the past Affidavits that had been filed.

A new law now authorizes the use of Affidavits of Correction in certain circumstances and describes who must sign the document.

What May Be Corrected? A corrective instrument may be used to correct a legal description (such as a distance; unit, or building number; subdivision or condominium name, etc.), a party’s name or marital status, homestead information, dates, notary information, and a number of other issues.

Who May Sign? The new law provides that the person who may sign is a “…person having personal knowledge of the circumstances of the conveyance and of the facts recited in the correction instrument, including the grantor, the grantee, the person who drafted the conveyance that is the subject of the correction instrument, or the person who acted as the settlement agent in the transaction…” In other words, the title company, any party, or an attorney involved in the transaction can all sign.

In certain circumstances, however, only a party can sign. For instance, if a buyer is to be removed from title, THAT buyer must sign. If a parcel is corrected to add land, the Sellers must sign. 

What About Old Affidavits of Correction? The new law “grandfathers” in old Affidavits of Correction if they would be valid under the new law.

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