When you purchase property, you receive what’s called a deed to the property. When you receive the deed, it should be recorded in the public records of the county that the property is located in. Recording your deed, however, does not guarantee or insure that you are the sole owner of the property. For instance, there may be a mortgage on the property that has not been recorded on public records and thus a bank that you have no knowledge of may have an interest in your property. What do you do? What should you have done?
You should have purchased title insurance with your closing. Title insurance is a type of insurance that insures and protects against financial loss due todefects in title to real property. An individual, typically the Buyer in a transaction, needs title insurance to protect against all of the known and unknown people who may have a valid or invalid interest in their soon to be property. There is a vast array of possible defects that title insurance can protect against. Some defects being deed defects, defects in the chain of title, liens on the property, outstanding and unrecorded mortgages, encroachments, and hundreds of others. Title insurance will defend against a lawsuit attacking the title, or reimburse the insured for the actual monetary loss incurred up to the dollar amount of insurance provided by the policy.
If you have further questions about title insurance, give us a call at 904-321-9108 and we will be happy to explain how title insurance further.
The cost of title insurance will vary based on the purchase price of the property. The price of title insurance is regulated by the state that the property is located in. For instance, Florida regulates title insurance premiums and no matter what title closing company you go to, the title insurance premium will always be the same. Further, your title insurance premium is a onetime payment at your closing.
The Florida rates for title insurance are as follows:
Example: a purchase price of $100,000 would yield a title premium expense of $575 to be paid at closing in order to receive title insurance.
This option is usually present in timeshare contracts and must be addressed at a closing. Let’s do an example to show how it plays out in real life. Buyer agrees to buy and seller agrees to sell seller’s timeshare. They sign a contract for the transaction and everything is going as planned. After they sign the contract, typically, seller’s realtor will contact the management company or developer of the timeshare property. The realtor will ask the company for a Waiver of the Right of First Refusal. At this point, the company has to option to give a waiver or purchase the property from the seller. Almost every time, the company will grant the waiver. After the waiver is granted, the title company will record it on public records at the time of closing, showing to the world that the ROFR has been waived
An estoppel letter is a legal document provided by the seller’s timeshare management company, homeowner’s association, or condominium association. The estoppels letter states the current owner’s financial standing in regards to the owner’s association dues. It will show any past due balances, current fees due, and lists any future special assessment dues.
The management company or association normally charges a fee to prepare the estoppel letter and by law they have 15 business days to provide the letter after requested. The estoppels letter preparation fees can range from zero to $500.00. Many will charge an additional rush fee if the letter is needed before the 15 days, as well as an update fee if the closing is delayed beyond the good through date.
Why do I need an estoppel letter? Any property being sold with title insurance will require an estoppel letter so the title agent can clear the title of any encumbrances created by the seller. Thus, giving the buyer clear title, with no hidden encumbrances to worry about.
TIP: If association dues are not paid, an association may have the right to place a lien on your property!
This is a common, and understandable, question.
This is because any and all closings regarding real property in the United States must comply with the laws under the Foreign Investment in Real Property Tax Act of 1980, 26 U.S.C. § 1445. The FIRPTA statute require all closing agents, title companies or attorneys, to withhold 15% of the net proceeds of any transactions that include real property for the purposes of paying any outstanding property taxes.
This statute was created and intended to protect against non-resident foreign, alien, sellers who do not pay the property taxes on their sold property, then transfer the property sale proceeds out of country, leaving the buyer, or potentially the closing agent, with a tax bill that they are not responsible for.
However, FIRPTA does provide exceptions to their withholding requirement.The simplest, and most applicable one, is for the sellers to (1) sign an affidavit, (2) containing the sellers' Social Security Numbers, (3)stating that the sellers are not subject to FIRPTA, and that the (4) sellers are US citizens for the purposes of the transaction. If you can do this, we do not need to withhold and proceeds from the transaction and why we request your social security number.
What if I’m not a US citizen? FIRPTA withholding does not necessarily apply to all non US citizens. If you have a green card or pass the Substantial Presence Test, as defined by the statute you will qualify for an exemption from FIRPTA. The Substantial Presence Test has a variation of qualifications, but in general, if you have been in the US for 183 days over a 3 year period, and at least 31 of those days are from the current calendar year, you qualify as a US resident for tax purposes.
If you have any questions, your Realtor should be able to further explain how FIRPTA works, as the requirement to comply with FIRPTA is also contained in almost all executed contracts for the sale of a property.
If your realtor is unable to answer some of your questions, visit the IRS website explaining FIRPTA: https://www.irs.gov/individuals/international-taxpayers/firpta-withholding or feel free to call our office at 904-321-9108.
A 1099-S is a form created by the IRS to insure that all capital gains from a real estate transaction are reported to the IRS. The form is normally issued by a title company, such as Trusted Title, at the time of closing. The 1099-S is issued to the seller, who must report the sale on their personal income tax return.
Trusted Title, as the closing agent, must also report the transaction. This, however, does not exempt the seller from their tax reporting requirement.
What if I sell the property for a net loss and receive no capital gains, do I still need a 1099-S? Yes. Trusted Title must report any and all property transactions. Also, if you sell your property for a loss, you should want the 1099-S even more, to file under the "loss" category in your taxes. There may be some exceptions to the 1099-S, if the property is your homestead, but as a generalrule, a 1099-S is always needed.
If you have further questions regarding the IRS 1099-S form, please visit the IRS’s page, here: https://www.irs.gov/uac/form-1099-s-proceeds-from-real-estate-transactions.
If you have further questions regarding your tax returns please contact your financial advisor.
After your closings, Trusted Title will record documents on the county public records where the property is located. The purpose of this is to show the world that the property has changed hands from the seller to the buyer. This helps preserve the chain-of-title of the property; insures that the title can be traced back to its origins; and protect the buyer’s interest in the property.
Trusted Title’s priority is your privacy and security. We only record documents that must be recorded. Examples of typical documents that must be recorded are the deed, any mortgage documents, any waiver of right of first refusal, or possible trust certifications. Each and every property transaction is different, and may require more or less documents to be recorded on public records. If you have any questions about what documents will be recorded on public records, feel free to give us a call and we will go over it with you.
Yes. Trusted Title can do, what we call, a mail-away transaction. Almost all timeshare transactions are mail-away transactions. The way it works is we will email you your closing documents. You may sign your documents electronically (if the document allows for it), then mail the documents back to us. If your documents allow for all electronic signatures, you may email or fax them back to us. If the documents require a physical signature or notary, such as the deed or mortgage, you must physically mail us the original copy back before the closing date.
Can I sign my documents before the date of closings? Of course. The date of signing has no effect until the effective date, which will be the actual closing date. That means you can sign all documents before the closing date, no problem.
I am the buyer and I see that seller is supposed to sign this document that was emailed to me... do they have to sign my signed copy of the document? No. Seller or buyer may sign documents in counterparts. What that means is, buyer, you can sign your copy of document A and seller can sign his copy of document A. Once the copies are sent back to Trusted Title, we will combine the counterparts into one final document, signed by both parties.
Trusted Title will work its hardest to coordinate all closings ahead of time to make sure that each party has plenty of time to sign their documents and send them back to us prior to the closing date.
Prorations occur when the buyer or seller pays for services in advance, or will owe something in the future, for the property. The most common of these are taxes and home owner’s association/maintenance dues. Typically, all taxes are paid at the end of the year, whereas, homeowner’s association (HOA) dues are usually paid at the beginning of each month, quarter, or year. Let’s look at an example: we have a closing scheduled for June 15th. The seller has not paid the end of the year taxes but has paid the monthly HOA dues. Now, is it fair for the buyer to pay for ALL of the year’s taxes when the buyer only owns the property for half of the year? Is it fair for the seller to pay for half of a month’s HOA dues for the buyer? No. So, at the time of closing, Trusted Title will adjust for this. We will credit the seller, and debit the buyer, for half a month’s HOA dues. We will also credit the buyer, and debit the seller, for 6 months and 15 days of taxes (if taxes are paid on December 31).