Why is Title, Escrow, and Title Insurance important for New Mexico home owners?

Tego Venturi: So, so Tracy one, let’s just go into this. We want to talk about all the different I’m going to call it. The players in the real estate transaction, you have, of course, the real estate agent. Who’s kind of the quarterback holding this all together. You’ve got a lender. Who’s usually, unless it’s a cash purchase, you have the title person or the title, agent title, company. And that’s what we’re going to dig into deeper here. But then you also have insurance. You have inspectors, you have an appraiser, could be repair people. There could be other people when I’m, who am I forgetting?

Tracy Venturi: That’s the bulk of them. That’s the majority of the different players in the transaction.

Tego Venturi: And so there’s a lot of people involved there. And in people that maybe have never owned a home, bought a home, or maybe people that have owned and bought a home here, this word title, or title insurance, or title agent, we want to go into what that is, Tracy and, and, and, you know, first off, what is, what is title, title? Yeah. What is his title?

Tracy Venturi: What does title mean? Interestingly enough, you know, we’re not lawyers. So what we’re talking about, isn’t legal advice or anything

Tego Venturi: For informational purposes only this is not legal advice

Tracy Venturi: They’re referring. When you talk about title, it’s referring to the legal ownership and the legal right to use a piece of property. So we know title, you know, like home cars have title, right? And it’s to keep track of ownership of the property. So titles like that. But there’s quite a few things that that title does with regard to real estate. And people go, why am I paying for title insurance? What is it really doing? Right. So title insurance, you know, so it’s a bigger topic, but so we’re going to look for past ownership claims. They’re going to make sure that you have clear ownership to the title and ownership of that property so that somebody else can’t come after you pay money for it and say, that’s mine.

Tego Venturi: And that’s what the title insurance does. So it’s, you’re, you’re, you’re basically buying an insurance policy that is guaranteeing that when you take ownership of that property, there’s no other claims of ownership against that.

Tracy Venturi: Right? So, you know, a lot of times, especially here in New Mexico a lot of times property gets passed down from generation to generation and perhaps the original owners forgotten and the paperwork wasn’t done and the person who’s selling the property, got it through just the generational changes of that property. And maybe there was never clear transfer and or maybe it was adverse possession. That’s one of those things we learned in real estate school, right? Adverse possession, hardly ever, you know, somebody leaves and somebody moves into a property or takes over that property or lose use of part of the land.

Tego Venturi: People hear the term squatters. Right. That’s kind of what they’re talking about. So yeah. So the, the whole,

Tracy Venturi: Just making sure someone in the past, can’t come back and take title of the property, right? Oh, it’s mine, it’s mine. So they’re, they’re insuring you to have clear title.

Tego Venturi: And so the title agent and title insurance company, they’re doing all those searches. They’re making sure that you quote have air quote, clear title on the property when you take ownership. And they’re, they’re issuing an insurance policy saying that you have clear title, and if anybody makes any claims in the future, we’re ensuring that. And of course, there’s exceptions. And you want to look through that when you get your, what they call title binder, do you, and just talk about what a title binder is

Tracy Venturi: After the property is either listed for sale or we’re going to be listing it, or it’s under contract, the title, company issues, a title binder. And they’re going to go back and list all of the things they’re finding with regard to that property and make it known. So some of the things that are going to be in there Tigo some of the things, the title company’s doing for us is they’re checking for liens, right? Is there, are there any liens against the property? So

Tego Venturi: You need somebody having some sort of financial claim or ownership claim, but generally it’s a financial claim. So it could be a tax lien. It could be a debt of some other types of debt. It could be a mechanics lien, right?

Tracy Venturi: It could be for past child support and they placed a lien on the property. It could be the, that the, in addition to liens a different word the city or County or municipality may have placed some sort of extra tax on the property because of something where they improved the roads or they improved the gas lines in the street and they assessed it. Right. So they’re going to look for those things also also they’re going to look for easements on the property. Does somebody else have the right to use a portion of the property? And that’s not that uncommon here, right?

Tego Venturi: No. And especially places like the North Valley here in Corvallis, where, where you have a road that that’s a private road that cuts through, you know, people’s property. That’s very, that’s, that’s not uncommon at all,

Tracy Venturi: But most properties in New Mexico have some form of easement on them because most of them have some sort of a utility easement so that the gas and electric companies have the right to go on the property to take care of electrical or gas lines and things like that. So most of them have about a 10 foot easement just for that on the property. The other thing is they’re, they’re going to be working really hard to protect buyers against title defects. And we’ve kind of covered that. Unfortunately there are things, you know, that can come up. So doing that title search is pretty important. The other part that they do is they do all the paperwork. So they, they bring together the buyers, the sellers, paperwork, and any costs that were incurred during the process. So they get all the invoices from many companies that did inspections, repairs well, home warranties, homeowners, insurance policies, they put it all on that closing statement with the debits and credits

Tego Venturi: And they prepared the deed, which is the actual document that transfers ownership from, from one party to another. And the deed is this thing that gets get filed with the, the County records showing who’s in ownership of it.

Tracy Venturi: Right, right. So that’s kind of the quick high level, what the title company does in a real estate transaction.

Tego Venturi: The important part is you need it, you gotta have it. And it’s a critical part of the whole process. But looking at that title binder, if you’re buying a house and going through it and, and understanding what exceptions are, if there’s any, any challenges or issues on that, you, you know it right away.

Tracy Venturi: And just one thing you said, you got to have it. You don’t have to have it. That’s true. It is not required, but it’s something that,

Tego Venturi: Let me push back on that. If you’ve got a loan, if you’re getting a loan, you got a, the lender is going to require,

Tracy Venturi: Right. You can choose it if you’re, if you’re paying cash, but wouldn’t, you want all that extra protection.

Tego Venturi: I would never buy a property without it. I would never recommend to buy a property without it, even if it’s just a piece of vacant land out in the middle of nowhere, you know, that’s a hundred dollars, you know, you, you want to, you want to make, yeah. You have title of title. Tracy. Can I talk about market data? Sure.

Tracy Venturi: Yeah. Usual that you have some market data. Okay.

Tego Venturi: I, I, again, I real quick, you know, at the beginning, at the top of the show here, I just talked about November. I just want to hit on a couple of things that are happening in the market, in, in one of them is the extreme lack of number of homes on the market. So if you are thinking of selling and that’s our next topic is, you know, selling your home this winter we feel like it’s a good time. I mean, it’s th th the whole thing about when is a good time to sell, it’s a good time when you’re ready to sell. Right. It’s just, you know, there’s always going to be buyers. Yes. There’s less buyers out there right now. However, you know, home prices have, have really run up in the last six months in particular. I do think home prices have settled down here in the last month or so, but again, things have, have jumped up six to 8% since last year.

Tego Venturi: So there is an opportunity to sell if you’re thinking of selling. One of the, the overhangs that’s out there that keep people keep talking about is these people that are in on forbearance programs, meaning they have a mortgage, they haven’t paid on their mortgage because they’ve entered into a forbearance program with their lender. Technically it’s called the L the loan service service, who it is. And, and what that does. It just puts a pause on your payments for however long. It is, can be three months, six months up to 12 months at the very beginning of the pandemic. And when these forbearance programs came out, a lot of people jumped into them. It was a big number what’s happened though, since then, a lot of people have come back off. It they’re there, they’re making their payments again, and they’re moving on.

Tego Venturi: And, and so there was a lot of speculation that, you know, all these homes would turn into foreclosures. Well, just because delinquency levels are very high right now, meaning people aren’t making their payments. That includes the people that aren’t in forbearance programs, right? So they’re either going to extend their program or they’re going to sell their home, or they’re going to just start making up their payment, or they’re going to refinance and pay off that underlying loan. So there was a quote from Ivy Zelman, who is Elman and associates. There, they’re one of the big trusted national real estate consulting companies that do a lot of analytics around real estate. And her quote was the likelihood of us having a foreclosure crisis again, is about zero. And there’s so many factors to why that is true in all the different end information and data is pointing in that direction. So I just wanted to put that out there. Do we ever know for sure, no, but boy, the evidence sure. Shows that housing is going to stay pretty healthy, right?

Tracy Venturi: Tego, let’s talk about one more step of the process of who’s involved in a real estate transaction. So let’s talk about insurance, home insurance. So homeowners insurance is one of the, one of the other facets of buying and selling real estate, right? So when, when you buy a new home and you need to put insurance on it, so if you have a lender it’s required, right? The lender wants to make sure that that there’s insurance so that if the house burns down, the lender’s going to get paid off. Right. but homeowners insurance is interesting because it, it can vary quite a bit what your rate might be based on a lot of things, right? And a lot of times people might want to shop different home insurance companies because they vary a lot. Sometimes they’re more motivated. Their prices are different. It’s not price fixed, but when you’re getting a, a new home, one of the things that’s, you know, how shoot aging myself, but you know, the whole house cars can be like, lemons, lemons, a car, that’s a lemon.

Tracy Venturi: You have lots of problems with it. How has this can be like that too? And insurance people will tell you that some houses just have a lot of homeowners claims, right? So when you buy or buying a new house, one of the steps is to get quotes for homeowners insurance to make sure that the rate you get is acceptable to you. And we have had a few in the last year or two where the client calls to get the rate for the homeowners insurance, whether they already have an agent or they, you know, call three, one, three different agents and get quotes or whatever where the property has had a couple of big claims. And the insurance rates are very high if they can get it at all.

Tego Venturi: Right. And so that’s one of the contingencies. When you put a home under contract, as we call it or pending, basically you’re doing your due diligence. One of the due diligence steps is to get an insurance quote, make sure that the home is insurable at a, at a reasonable rate. Right? One of our friends is a very prominent insurance agent here, here in Albuquerque, actually the number one agent in the S in the state. And, you know, he, he says, as a homeowner, you need to think about when you are make, when you make a claim and when you don’t make a claim, because too many claims on a house could actually affect the resale value of the property, right. It’s something to just keep in mind

Tracy Venturi: Or make it very difficult to get insurance, right. Which is a problem. So getting that insurance quote, and like I said, they vary the prices. What, what are charged varies a lot? And the if you have a lender involved, they require you to prepay for one full year at closing for homeowners insurance. And that’s important because they want to make sure you keep it insured and it, and then if you have a lender, they are every one of your payments typically we’ll be collecting. So that a year from now, after closing, where, when the homeowners insurance premium is due again for another year, that the money is there and they pay it for you because they want to make sure the house is insured. So that’s, that’s kind of the quick on homeowners insurance.

Tego Venturi: Well, no, that was great. And do you have any more homes with the week we need to hit before we wrap up for today?

Tracy Venturi: I don’t know the homes that we were going to talk about are not available.