Wet and dry funding states can be tricky whether you’re new to real estate or are an experienced agent.  Wet and dry states impact your bottom line which is why it is important to know which states are wet, which are dry and where you may want to focus your business.  If all of this seems confusing, don’t worry.  We’ve put together this blog post to help you learn what dry and wet funding states are so you can know what to expect based on where you do business.

First lets cover the differences between wet and dry funding.

Wet funding states require that all mortgage funds are distributed at the close of sale, along with all other necessary paperwork, such as escrow conditions and signed loan paperwork. Dry funding states require that all funds are distributed after the close of sale and only after all proper paperwork has been completed.

This important distinction directly affects when real estate commission checks are distributed to agents, and when the close of the sale is technically completed. Let’s further define what each type of funding represents and how it differs between states with a couple of examples.

Remember:

• Wet funds materialize (are dispersed) at the close of sale.
• Dry funds materialize (are distributed) after the close of sale.

Example of a Wet Funding State

Virginia is an example of a wet funding state. The “Old Dominion” state requires that an authorized settlement agent completes a number of procedures, including home inspections, title write-ups, and preparing settlement statements.

Once this work is completed funding can be distributed and a house can be closed. Stringent requirements also mandate that the money is cleared and all wire transfers are received before disbursements are made.  Additionally, wet funding states like Virginia require that real estate agents be on record in the county before they can disburse funds for the sale of a home.

New real estate agents typically don’t like wet funding because these strict requirements can be a significant barrier to garnering quick experience.

States Where Dry Funding Is Permitted

Only a few states allow for dry funding, including:

• Alaska
• Arizona
• California
• Hawaii
• Idaho
• Nevada
• New Mexico
• Oregon
• Washington

States like Alaska and California allow for both wet and dry funding, but the real estate agents themselves decide on which to ultimately use. Dry funding is often preferred by real estate agents because it does not require the real estate agent to be on record in specific counties before disbursing.  Dry funding also makes it much easier for real estate agents to operate in new markets and determine the speed of their transactions.  That is why dry funding states are prefered by real estate agents over wet funding states.  

Title insurance costs are calculated by multiplying the purchase price of your home by the rate per thousand your insurance company uses. The rate per thousand is a going rate that is used for every thousand dollars that is calculated for the value of your home.

A quick example: if the rate is 0.6% for every thousand, and you bought a $300,000 the title insurance costs would be $1,800.

Other companies, though, may use a bracket-style to calculate their premiers. For example, the percentage per thousand will differ for homes up to $100,000 vs homes with a value of $100,001 to $1,000,000.  Other factors will also affect the overall costs, including billed hours towards conducting a title search, examination, and addressing any title defects.

You may be wondering why title insurance costs seem so expensive at the close of sale. Title insurance costs are incorporated into the closing costs of a home and represent a one-time purchase. For this reason, title insurance costs do not fluctuate and can seem expensive to buyers who have just made a very expensive purchase on top of that.

Here are a few examples of situations where title insurance premiums may differ.

Example 1: High-value home purchase

Remember this simple factor: the higher the value of the home, the higher the title insurance cost. Higher value homes will generally be more expensive to insure, whether against title or property.

Home value is generally calculated by using a number of factors, including:

• Comparative market value of the home
• Demand in the market
• Current condition

If you’re purchasing a home with higher value, expect to pay more in title insurance costs.

Example 2: Refinancing a condo and how it’s calculated

Buyers are required by their lender to purchase a new policy when refinancing a condo or property. Typically, your Title Company will offer a discount from the original policy, 20-40% off policy depending on jurisdiction,  for a condominium, which is based on the value of the condo as well as the rate per thousand of your insurance company. Talk to your lender and or title company about how much a new policy will cost for your title insurance.

If you’re LGBTQ, you’ve probably run into discrimination before.  But you probably didn’t realize that prejudices can impact you buying a home, even after a deal has been cut, and you’re in the closing process.  All it takes is one person who previously owned the home or was an heir to the property you’re buying to get in the way.  In some cases they may be able to destroy the deal, in others, they could create costly delays which may cause the deal to fall through.

Because discrimination remains a serious issue for members of the LGBTQ community. Understanding which issues could arise can help you to better prepare in case something happens during the closing process of your house.  It also doesn’t hurt to have an LGBTQ friendly title company and real estate agent on your side to watch over the deal, research the title and get you your home without hassle or worry.

Here are a few ways that someone who is homophobic could slow down or ruin your chances of buying a home at closing.

A Previous Owner Challenges Your Title

Suppose you’re a gay couple with children and you are trying to purchase a home from a seller. The seller does not mind that the gay couple has children or that they plan to move into his/her home. But a previous owner, privy to the situation, attempts to block the sale of the home by staking a claim.  Their claim states that it belongs to them for being a family member or heir to the property or estate.

Although the previous owners understand that he or she will probably not win, they still go through the court process just to impede the buying process and cost you as the couple more money so you have to defend yourself.  This costly and timely process isn’t always doable which can cause the deal to fall through.  So how can you protect yourself from this?  By purchasing title insurance you’ll be able to defend the property from this type of claim because the insurance should cover the costs of the claim and get it resolved.

A Contractor Uses a Lien to Financially Damage You as a Buyer

Another situation is if a contractor ends up not being gay friendly.  After your home is constructed, the contractor learns that it is for an LGBTQ person and decides to put a lien on the house you paid them to work on (whether it is real or not, or legal or illegal) for the sole purpose of  delaying the closing. Through a lengthy court process, the contractor will attempt to bankrupt or financially damage you as a buyer.  Although they probably won’t win it, they can take a serious chunk of money from you which could cause you to back off the deal.

To prevent this type of discrimination, it’s important to find LGBTQ friendly contractors. Do some research before hiring a contractor and leaving yourself vulnerable to this type of harassment.  You can contact a local LGBTQ community center or see if the town or city you live in has an LGBTQ group that can make recommendations for companies they’ve worked with previously for similar projects.

Neighbors Use Outdated Ordinances to Deprive You of Your Home

Neighbors in your community can also try to obstruct your legal right to use your home by bringing up archaic and old zoning ordinances.  That’s why its important to use a title company with a solid reputation.  During the closing process, your title company will search for zoning restrictions and ensure the house you’re buying is for residential living.  But mistakes can happen, even to the best so it is also important to have a title insurance policy in case this issue would arise.

Discrimination in housing and real estate towards the LGBTQ community is still alive and well so it’s important to know what and how issues can arise.  By being prepared with an LGBTQ friendly title company and real estate agent, you’ll be a step closer to avoiding any delays or issues and have less troubles buying your new home.

No, title insurance is not transferable because it serves as a lifetime guarantee to a legal title, unless that title changes. Since you paid in full for the title insurance during closing costs, it remains yours and is not transferable – not to your spouse, significant other or whomever.

If you’re frustrated and upset about this news, it’s important to remember what it is and why it is set up so that title insurance policies cannot be transferred.

Title insurance is a one time purchase that protects your ownership over a property from past liens and new claims.  That is why it can also only be purchased during the closing meeting of a home transfer from a title insurance company.

Can I Add My Spouse to an Existing Policy?

Yes, you can add a spouse or a dependent onto an existing title insurance policy. If you add a spouse or an heir onto an existing policy, the policy will not change and your property will remain covered.

Along the same lines, you and your heirs will always be protected from everything listed under that policy — even if you do not inhabit the property at a later point. Also, removing someone from a policy will not affect your coverage at all.

Will My Heirs or Dependents Inherent My Title Insurance Policy?

Title insurance can be inherited along with a property, but it cannot be gifted. If the owner of the property dies, the title insurance will continue as is for any heirs or legal beneficiaries of the property. But title insurance is not automatically transferred with a title if gifted or sold to a family member.

This means the title policy only terminates once the legal title transfers to a new owner.

In What Situations Will I Require New Title Insurance?

One of the only few instances title insurance may need to be tweaked is if you place a quitclaim on a residence for an LLC you do not fully own. In that case, the policy may need to be updated or a new one purchased.

In most cases, title insurance remains pretty inflexible to provide maximum protection under the law against any claims associated with the property.

Real estate agents are masters of home marketing, and they know exactly what buyers are looking for.  This includes knowing how to describe your home to make it stand out, getting the right angles in photographs to detail the property for a new owner and which features to focus on based on other properties that are selling or have sold in the area.  It’s important to remember that they only get paid when your home sells which is why your agent’s skills are so fine-tuned. They are masters at moving houses.

Aside from the points mentioned just now, here’s why your real estate agent deserves their commission and what you get in return for paying it.

The first thing they do is get your house in front of other agents.  Their network of peers has buyers looking for properties and this is something you do not have when you try to sell without an agent.  But that is only the beginning.

Next, your agent will list it on the MLS which is a private database for licensed professionals looking to buy or that are searching for properties for clients who are ready to buy.  Real estate agents also uses their own money for advertising and promotion and probably have deals with your local publications that home buyers use regularly. If you try to sell your home without an agent, you pay close to sticker price and the listing may not be as targeted or have preferred placement.

Because they do this for a living, their expertise in targeting the exact people who will be interested in your home is second nature to them. The commission is not only for the ads that run, it is for the years of experience they build finding buyers for homes and that is something only a trained professional can do.

They may also have contacts at real estate magazines, home buying sites and other marketing services that would take you countless hours to research, evaluate and find someone who will give you a fair price for listing your home.  The next benefit that only an industry professional can bring is his or her relationships.

From photographers to power-washing companies, contractors and stagers, even which title companies that can close your deal fast, your agent knows exactly who to contact for your old-home and who you can depend on to show up on time.  Because of the relationship and constant flow of business, there is quite possibly an industry or repeat business agreement lowering the price compared to what you would pay for a one time appointment.  In fact, negotiation is an area where your agent really shines.

They’re not emotionally invested in your soon-to-be ex-home, and going back and forth with a buyer’s agent isn’t as frustrating for them. They negotiate home sales regularly and know subtle tricks to make your position stronger.

For example, they might not put your offer of a home warranty in the listing, holding it back as a bargaining chip. Part of the commission you pay a real estate agent is to utilize their past experience in watching deals get put together that can close, and to come up with options and trade-offs you might not think of because you are not part of the industry. One of the biggest value adds that a real estate agent commission covers are the hidden traps to watch out for.  These can save you thousands of dollars by preventing you from making a mistake before signing the counteroffer.

The largest benefit to using an agent to sell your home, and why real estate agent commissions are high is that you do not have to disrupt your daily life.   Their job is to move the property and if it doesn’t sell, they don’t get paid.  That means you don’t have to take off work to show your house, you don’t have to miss an important event or even watching your kids play in a big game because an agent is calling about the listing or wants to see it.  The agent is there to show your home for you and work on sorting out everything from bringing foot traffic in to showing it only to solid perspective buyers.

The next time you wonder if getting a real estate agent is worth the commission you’re paying, and why you’re paying so much, think about all of the time they spend promoting your home, answering inquiries, and showing it to prospects so you can relax and keep living your life. The commission you pay your real estate agent covers all of this and in almost all cases, ends up being a great deal.

There’s no doubting it – title insurance rates are confusing. They’re baffling because most people immediately compare it to car or health insurance. But title insurance (both owner’s and lender’s) are nothing like a traditional insurance package that fluctuates in price, cost and coverage. That is where the confusion sets in.

If you’re asking yourself “Do title insurance rates increase over the time of a mortgage?“

The answer is no. Title insurance is paid in full with your closing costs if you choose to buy it.  The policy remains yours until you transfer the title or sell the property. Although it’s a one-time cost, the value of the title insurance does increase as property value increases, so it’s like an added win for you.  The longer you have the policy, the more it covers you for, and you never pay another penny on the policy.

Important thing to note: Only enhanced title insurance value increases with the increased value of the home up to 20% on average.

It is also important to know that there are two major types: owner’s and lender’s policies. The owner’s policy is issued for the purchase price of the property and contains all the basic coverages. The lender’s policy covers the amount of the loan.  But these are different than automobile or health insurance.

Auto, health and even care insurance policies are typically paid in monthly installments as you use or own the item that is insured.  The item can go up and down in value or become higher or lower risk.  That is the reason why they fluctuate and change.  Title insurance is a one time fee which is why it looks expensive when you see the price at your closing appointment, but title insurance rates do not change because you have already paid in full.

Title insurance is an added expense when purchasing real estate, and it’s an absolute must. Why? It protects you from any loss  (claims or legal fees) that arise from issues connected to the title to your property, such as:

• Unpaid real-estate taxes
• Unpaid mortgages
• Other liens against the property that are unresolved, including foreclosure that give creditors the right to foreclose on the property
• A forged signature in the past to transfer title from one property owner to another
• Transferor did not own the property to begin with
• Gaps in prior title ownership like a deceased owner whose estate has not been finalized and may have heirs with legal rights to the property.

You may now be asking yourself “What if my property value goes up?“ or “Does the title insurance policy still cover it, or does my rate increase?“.

This is worth reiterating because it’s another frequently asked questions. The answer is no, your rate will not go up. You pay a one-time fee for your title insurance at closing, and regardless of how much value your property gains, the title insurance policy will remain the same. The insurance coverage on “Enhanced Policy” goes up with inflation up to 20% in most states. But the premium paid at closing doesn’t change.

You find a house, make an offer, get to closing and pop the champagne. Next week you find out the house is no longer yours.  This happens more than you think.  Below you’ll find 7 examples of how this could happen and the best way to protect yourself from losing your home.

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Examples of How You Can Lose Your New Home After Closing

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No, but it is a wise idea.  When you pay cash for a home, you may think it’s permanently yours and no one can take it. However, if there’s a problem with the title it can threaten your ownership rights. That’s why banks normally require a lender’s policy when you take out a mortgage to pay. When it’s just you and you’re using cash, you’re the one taking on the liability and that is why having an owner’s policy is a smart idea.  But what is the likelihood something could happen?  Here’s some examples.

If a past owner used a fictitious name or forged a notarization on a document during a previous closing, it can break the chain of title and affect all of the transactions that happen afterward.  Your title company will do their best to detect forgeries while researching records and the property’s history, but there is also room for error, especially when someone lied about who they were or a name was signed incorrectly in the early or mid 1900’s.  There is a lot of room for error.  You also have liens.

If a person claims and can prove that a previous owner owed them money or a debt, you may end up losing your home, or the land it is on.  This doesn’t have to be recent, it could be 5 years ago or even dating back decades.  Was the home built or owned by someone pre-stock market crash in the 20’s?  What about the .com bubble burst?  Either of these could have caused the previous owner to have a debt that could come back to haunt you.  That is something your title company may not be able to find. A third example which should hit close to home for many of us are clerical errors.

Have you ever called to have something refilled at a pharmacy and the person was swamped and mistyped your name and couldn’t find you?  Maybe you needed a record looked up and the person couldn’t hear exactly what you said and asked you to repeat yourself two or three times.  It could even be that someone misspelled your last name, and it now becomes a hassle for you to get it changed even though it was that company’s employee that made the mistake?  The same thing that happens then could cost you your home.

You are probably not the first person to own the property, and with it transferring ownership multiple times and numerous employees re-entering transactional data, there’s a good chance there could be clerical errors.  These errors whether they’re filing or getting the name wrong because the person was working late one night are costly.  And because you paid cash, they are your financial burden to fix.

Even if you paid cash for your home, it can be taken away like in the examples above.  Defending it can be incredibly costly with legal fees and that is why it is recommended you buy a title insurance policy, especially in cash deals.

If you’re buying a home with a mortgage or you’re refinancing your loan, you’re likely going to need information or documents from the federal government. But what happens when workers are furloughed during a shutdown?

If it lasts for more than a few days, it can affect the home buying process and delay your closing.  Not only does this cost you time and stress, but possibly money too you have contingencies in your purchase agreement. The good news is that you don’t have to let the shutdown affect your home buying process. Below are some ways a furlough can affect your mortgage approval and what you can do to work around some of the more common problems so that your home closing can be fast and less stressful.

HUD Is Short-Staffed

HUD manages the FHA and VA loan-backing program for private mortgages, and while the loans are still being written and approved by private mortgage lenders, the support staff won’t be helping with underwriting and answering questions. As a shutdown continues, the backlog of mortgage applications grows meaning that even when things go back to normal, your application could still take a lot longer than usual. Additionally, [Read more…]

Closings on estate sales can be complicated even when everything is in order and the process goes smoothly, but they get really tricky if there are any issues with the title. Good real estate agents know what problems might arise during an estate sale and work with the probate attorney, executor, and escrow officer to avoid potential title exceptions before they cause trouble and delay a closing.

Why Do Title Claims Occur on Estate Sale Closings

Most estate sale title claims come up when a homeowner listed on the legal title dies intestate, which means they didn’t have a will. Without a will, their possessions must be divided up by a probate judge who will hear the facts in court, then make a decision on how to distribute the assets to the heirs. The process can be unpredictable until it’s finalized and a home cannot be sold until the entire process is complete, a personal representative or executor is named, and letters testamentary have been issued.

All of this can take months to clear up, and no transfer of title can happen until the process is complete.  If you were buying the property as a flip or investment, this can kill your deal and cause issues with your lender.  That’s why it’s imperative for agents who list and buy estate sales, especially at auction, to know what could go wrong and how to head it off at the pass before the property goes under contract and closing dates are set.

Here’s a quick guide to common estate sale title issues so you’ll know what to watch out for and how to be proactive to prevent clouded titles so the escrow company can close on time.

Contested Wills and Contentious Family Members

A death in the family is tragic and stressful for all involved, and often brings out the worst in people. When the last will and testament is read, it’s sometimes a big surprise to children, siblings, and spouses who thought they were going to get the house, to only find out that they’ve been disinherited. Not only can spouses and children contest a will, so can anyone who has ever been named in previous wills. Contesting a will is a lengthy, expensive process and, until the probate court makes a decision on the validity, no assets, including the title to a home, can be transferred.

Wills can be contested months or years after death, or even longer if there’s alleged fraud involved. However, if title is held as joint tenants with the right of survivorship, the property shouldn’t be subject to probate the way the other assets might be.  Therefore, living spouses who were jointly listed on the title will probably be able to sell the house even if the will is contested in court. Working with people you know who have obtained deeds properly without adjudication, can help you avoid the nastiness of contested will and heated arguments among the seller’s family over who owns what.

Secret Marriages That Reveal A Different Legal Spouse

Secret marriages aren’t just a made-up plot in romance novels. Many people marry badly or under less than ideal circumstances that they find embarrassing, and sometimes that lead them to abandon their first spouse to start over with a new love. This not only causes personal problems, but it can also change who might legally inherit a property.

Most people in bad marriages seek a divorce to end the marriage before remarrying. Even if they stay single, divorce is the legal means to dissolve the marriage contract. If someone has a legal marriage license but never got divorced, their original spouse is still their legal spouse, which means that a remarriage is void under the law. Legal spouses and children are usually the first in line for any inheritance when heirs are determined by a probate judge. A botched divorce could mean a first spouse gets everything.

Sometimes people think they are divorced when they actually haven’t finished the process to make it legally binding. Maybe a document wasn’t filed correctly or maybe they had a marriage annulled by religious authorities and they thought that was good enough to cancel the legal marriage contract too. It’s even possible that someone doesn’t remember getting married, especially if they have medical issues like amnesia or even substance abuse problems.

However, if a previous marriage that was never ended is discovered during probate, the surviving spouse might end up not being a legal spouse at all which means they may not actually be the heir to the property.  Consequently, someone completely unknown could end up with their interest in the house. Regardless of circumstance, all of the details will have to be sorted out in court and beneficiaries named before a home can be listed.

Finding previous marriages is easy enough that an agent can do a quick search without too much effort. It’s fairly straightforward, because marriage and divorce records are public information kept by government officials. You’ll need to know any maiden names if applicable, and then you can do a preliminary search to discover if an unknown spouse might cause a problem. Try these tips for finding marriage records:

• Ask the surviving spouse for any legal documents, including divorce records, that affect anyone listed on the title. If you’re worried this sensitive subject might cause awkwardness in your relationship with the widow or widower, have the probate attorney ask.
• Google the deceased owner’s name with keywords like “marriage” and “divorce”. Many times, marriages are published in newspapers, church bulletins, or other records, which will come up in an internet search.
• If you know where they’ve lived in the past, try looking up public records in state, county, or city where they’ve resided. The CDC has a list of where to look for marriage and divorce records sorted by location.
• Check family tree and genealogy websites to see if the homeowner is listed in multiple family trees or connected to families that don’t fit with what you know. This can give you names, dates, and locations to use in your other searches.

Illegitimate Children Impeding the Sale

When the court determines who the rightful heirs to an estate are, spouses and children generally take precedence over other possible heirs. That includes all of the children, even if they were conceived out of wedlock and even if no one else knows about them.

A love child could inherit a portion of the property and might not agree with the other parties about whether it should be sold. Widows might refuse to work with children fathered by their husband with another woman, especially if infidelity was involved. It all adds up to a family feud that will cause headaches for everyone involved in the closing.

Another issue could be back child support. If a child is owed support and the non-custodial parent has a judgment or garnishment, the arrears could be taken out of the estate which can complicate a listing and force a court confirmation sale, which causes even more legal red tape.

Preventing issues with children born outside of the marriage isn’t easy. Birth records aren’t usually made public, and birth announcements for illegitimate children just weren’t done in the past so a newspaper search probably won’t turn up any results. You can check for any child support actions or paternity suits with the court, which might give you a lead. Family tree software might also give you clues to the existence of additional children.

Tax Liens Encumbering an Estate

Unpaid taxes can cause a tax lien on a home, which can be placed by the IRS or any other taxing authority. Liens must be paid in order to get a clear title and sell the house. Tax problems on estate sales are more common than you might think. Lengthy nursing home stays, financial difficulties if the homeowner has health problems and is unable to work, or even early stages of dementia can mean tax bills go ignored.

Keep a tax lien from killing the sale with a simple search. Experienced agents should be able to quickly identify all of the entities where property taxes should be paid, and most tax records are accessible online. Court records for judgments and liens for the deceased are also easily found, although you might have to take a trip to the courthouse where the property is located. Finding out about tax liens early in the process gives the personal representative of the estate or surviving spouse enough time to pay the back taxes and clear the title before you list the home for sale.

Discovery of a Hidden Will

If a homeowner dies without a will, the probate court may sell off real estate holdings in order to liquidate all of the assets and distribute them to heirs that have been identified. Even if the current homeowners are alive, if any of the past owners died while they owned the home, sellers could be blindsided by the discovery of a hidden will that name unknown heirs to the estate, clouding the title until a court rules on the matter.

There’s no way to be absolutely sure that there are no secret wills tucked in a file cabinet or a drawer but obtaining a full ownership history can help you determine if a problem could exist, and if more research needs to be done. Look to see if the property has been part of the probate process, which means there wasn’t a legal and binding will found during the proceedings. This should give you names and leads for further investigation. Current family members might also know some information that might help. Is there a family story about a missing will or secret documents that have never been found? If so, take a closer look at all of the paperwork and make sure you have a good title policy in place and a reputable title company to protect the new owners after purchase.

Married Couples Who Have Broken Joint Tenancy and Are Tenants-In-Common

This problem could arise if both spouses are named on the deed but one has placed his or her interest in the property into a trust, which severs joint tenancy. This makes the owners tenants-in-common, which means that upon death, the surviving spouse won’t automatically inherit the property, and a judge will decide who the rightful heirs are based on the will or state laws. Joint tenancy for married couples means that they both have an interest in the property and survivorship rights so if one spouse dies the other inherits their share of ownership without having to go through probate.

Sometimes well-meaning homeowners are trying to protect their spouse but don’t seek out qualified estate planning advice, creating a trust structured in a way that accidentally affects joint tenancy. Even if the deceased spouse meant for the widow or widower to inherit the home, if the title is in a trust it will have to go through probate court which can take weeks or months to clear the title before the home can be sold.

Real estate agents can get a heads up on this problem by getting a complete history of all of the documents, wills, and contracts that have to do with the title. If you are planning to list a home from a widowed seller, ask them specifically about if there were any trusts created involving the property’s title.

Estate sales can be great listings, especially with experienced agents with the knowledge to prevent clouded titles. By having open communication with the sellers, gathering as much documentation as you can, and knowing how to find records, you can nip problems in the bud and get that estate home sold.