When you bought your home, there was a cascade of paper that you thought would never end. It seemed like you were signing for hours. When you were done, you were given a legal size envelope filled with a stack of papers. You were told that all of your home purchase documents were in that envelope, and you believed them. You never looked through those documents. You just took that envelope and filed it away. Bad move.
If you do estate planning with our office, you will provide us with a list of all of your assets and debts, with documentation. Without this information, we cannot properly advise you regarding your estate plan or properly fund your trust. For every parcel of real estate, we request copies of the recorded deed, declaration pages of homeowners insurance, latest tax bill, title insurance policy, for any mortgages, all pages of the recorded mortgage and signed note, and for any home equity line of credit, signed equity loan agreement and all pages of the recorded mortgage.
Over the last 32 years I have been doing estate planning, I have reviewed documents for thousands of parcels of real estate. And do you know what I have found? The envelope given to the real estate purchaser almost never contains a complete signed set of the purchase documents. Over 90% of the time, the documents given to the buyer and seller are only unsigned copies of the documents signed at closing.
The closing agent usually prepares the closing documents weeks before closing. There are three stacks of documents, the buyer’s, the seller’s and the one to be signed. What oftentimes happens is that there is a change that needs to be made before the closing and it only gets made to the signing documents, and not to the buyer’s stack or the seller’s stack. Unfortunately, about 20% of the time when we compare the signed closing documents to the unsigned copies given to the buyer at closing, they do not agree. That is why we do not rely on the unsigned copies, only the signed and recorded documents.
Recorded deed(s).
We review the recorded deed(s) when the property was first acquired, and all subsequent deeds splitting off portions of property. The deeds recorded at the register of deeds office gives notice to all the world that you own the property. When we review the recorded deeds, we regularly find errors in the legal descriptions, the parties’ names and how it is titled. We occasionally find that land contract buyers have never received a deed to their property when the land contract was paid off.
The recorded deed is not included in the stack of documents you receive at closing. It does not get recorded until after it is signed at closing. You generally will receive the recorded deed several weeks after closing in the mail from the register of deeds. Make sure that when you receive the recorded deed that you put it with all of the other real estate closing documents. Once recorded, you can always get a copy of the recorded deed from the register of deeds office.
Recorded mortgage
Like the recorded deed, the recorded mortgage is not included in the stack of documents you receive at closing. It too does not get recorded until after it is signed at closing. However, you generally will never receive a copy of the recorded mortgage because it is usually sent back to the mortgage lender. You typically have to get a copy of the recorded mortgage from the county register of deeds office. We request all pages of the recorded mortgage so that we have all terms and conditions of your mortgage, such as do you have a due-on-transfer clause in your mortgage.. We regularly find that the unsigned copies of the mortgage given to buyers at closing are missing schedules and/or riders.
If you have a home equity loan or home equity line of credit, that is also secured by a mortgage on your home. Make sure that you also have copies of all pages of that recorded mortgage to document all the terms of the mortgage.
Signed note.
When you borrow money to buy your home, you sign a promissory note in which you agree to pay back the loan to your lender. The note contains the original loan amount, interest rate, amount and frequency of payments and other terms of the loan. To get a copy of the signed note, you usually have to request it from your lender. We want to see a copy of your signed note because we want to know what your obligations are and so that we do nothing that would accelerate the payment of that note. If you have a home equity loan or home equity line of credit, make sure that you have copies of all pages of the signed loan agreement to document all the terms of that loan.
Title insurance policy.
If you bought your home in the last 30 years or so, you most likely were provided title insurance by the seller. The purpose of title insurance is to protect your ownership in the home. With title insurance, if somebody later claims to have some sort of interest the home, such as a lien, easement or other claim, the title insurance company would pay to clear your title to the property.
Most title insurance policies remain in full force and effect as long as you have any interest in the home or when you transferred ownership of the home with a warranty deed. You usually receive the policy in the mail about 1-2 months after closing. The policy usually has 4 pre-printed pages and 2 or 3 schedule pages. When you receive it, review it. Make sure your name is spelled correctly and that the legal description is correct. We have seen these types of errors more than once. If satisfactory after review, file it with your other purchase documents.
Only about half of our clients can initially put their hands on their title insurance policy. Without your title insurance policy, when something comes up in the future, you are on your own. If somebody files a claim against the property, such as a lien, easement or encroachment, without your title insurance policy, you may be liable to foot the bill personally for all the legal fees and other costs necessary to clear the title to your home.
Closing Statements.
When you purchased your home, you likely would have signed a closing statement. That closing statement listed all the particulars of the sale, including the purchase price, all the closing costs, tax prorations, etc. In most home sales, there are buyer’s and seller’s closing statements and when there is a loan involved in the purchase, a HUD settlement statement. Make sure that you have copies of both the buyer’s and seller’s signed closing statements, and if any, the signed HUD settlement statement. If you ever need to prove that you should have a title insurance policy, those statements show that title insurance was purchased.
Summary.
In order to protect your interest, make sure you have copies of all of your signed recorded documents and they are complete and correct. It is a whole lot easier to gather this information now, while you are alive and well, than when you are not.
By: Matthew M. Wallace, CPA, JD
Published edited August 19, 2018 in The Times Herald newspaper Port Huron, Michigan as: Do you have all your real estate documents?