What is title insurance? What is an escrow or escrow account?

Whether you are buying a property with cash or you are taking a loan, title insurance is necessary for the transfer of property. Title insurance is obtained through insurance companies, such as Riverside Abstract and is managed through a law firm specialized in real estate.

Title insurance is purchased once and is in effect for as long as the owner has an interest in the property.

Here, title insurance agents from Riverside Abstract will share more about what title insurance is and when it is needed.


Title insurance on a property is part of the buyer's closing costs. Riverside Abstract title insurance agents claim that title insurance protects the buyer from possible defects or encumbrances in the title, third party claims, inheritance rights, transaction fraud, deed errors, lack of authorization from the parties, debts or open permits with the city, etc.

 

Types of insurance

Riverside Abstract title insurance agents indicate that when a property is purchased, insurance is required. There are 2 types of insurance: owner's title insurance (an Owner's Policy), which protects the buyer, and lender's title insurance (a Loan Policy), which protects the lender.

From Riverside Abstract share that, if the purchase is made in cash, only buyer's insurance is necessary. When applying for a loan for the purchase, both are required.

 

What is an escrow or escrow account?

Title insurance agents from Riverside Abstract explain that it is an account that is used to receive the initial deposit of a transaction. It is made through a title company or the attorney in charge of the process. That is to say, the money does not go directly to the seller, but is kept impartially until the end of the purchase. The deposit is made to formalize the commitment to purchase the property. Usually, the amount of the deposit ranges from 5% to 10% of the purchase value, depending on what is agreed with the seller.

 

When is the deposit paid?

The contract will stipulate in how many days the buyer will have to make this deposit. Title insurance agents from Riverside Abstract explain that they are usually made the day after an offer is signed by the buyer and the seller (executed offer). After the seller accepts the offer, the deposit will not be returned unless one of the clauses of the contract is not fulfilled. The funds from the escrow deposit are used at the end of the transaction in favor of the buyer.

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