FREQUENTLY ASKED QUESTIONS

• Escrow Agent... Who is this?
• 1031-Exchange... What is this?
• Exchange Process Under 1031... What is this?
• Title Insurance... What is it?
• Ownership of Real Estate... What is it?
• Abstracting... what is it?
• Hidden Risks... What are they?
• Title Evidence in an Abstract State... How is this different?
• How does a Title Insurance policy protect against these dangers?
• Summarizing, Title Insurance means this to you
• And you only pay once... When?

Escrow Agent... Who is this?

Because of the amount of money involved and the complicated nature of real estate transactions, the seller is reluctant to part with his property until he receives the payment from the buyer; and the buyer is not anxious to part with his money until the seller has conveyed the property. The solution which is most often reach is an escrow. The term escrow refers to placement of funds and/or documents in trust with a third party who is instructed under what conditions the funds and the documents may be delivered and to whom. The escrow acts as a "clearing house" for the funds which are deposited with it.

The escrow agent is responsible to the parties and must be certain that there has been strict compliance with the conditions of the Escrow Agreement before delivery of funds or documents. The escrow agent should not be required to assume the responsibility of deciding a controversy between the parties. In such cases, the escrow agent may bring an action in interpleader against the conflicting claimants to compel them to litigate their claims between themselves.

1031-Exchange... What is this?

1031 of the Internal Revenue Code provides one of the best tax strategies for deferring the capital gain tax that would ordinarily be assessed on the sale of investment property.

The tax deferred exchange: By utilizing an exchange to defer the capital gain tax, the property owner has substantially more equity to reinvest in a replacement property. The tax code states: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment." Property owners can accomplish virtually any investment objective with tax deferred exchanges, including greater leverage into a replacement property, investment diversification, freedom from joint ownership, improved cash flow, geographic relocation and the consolidation of multiple business or investment properties.

Exchange Process Under 1031... What is this?

A typical tax deferred exchange is very similar to a taxable sale transaction except that prior to closing on the property being sold Fidelity National 1031 Exchange Services, Inc. (FNX1031) as the Qualified Intermediary is assigned into the Sale Contract and instructs the closer to transfer the Exchanger's property to the buyer via direct deeding. The exchange proceeds (equity) are deposited into a separate exchange account to comply with the exchange requirement that the Exchanger is not in actual or constructive receipt of the funds at any time during the exchange. The exchange period begins with the transfer of the first property and allows the Exchanger 45 days to identify property and a total of 180 days to close "like-kind" replacement property. The exchange is complicated when FNX1031 is assigned into the Purchase Contract, uses the exchange proceeds to acquire the property and instructs the closer to transfer ownership from the seller to the Exchanger via direct deeding.

Title Insurance... What is it?

Fire insurance protects you against losses from fire. Collision insurance guards you against the cost of a damaged car. Theft insurance - well you get the idea.
Title insurance protects your title or leasehold interest to real estate that you are about to acquire.
To understand why title protection is essential, we need to consider real estate for a moment.

Ownership of Real Estate... What is it?

Real estate has always been considered man's most valuable possession. It is so basic a form of wealth that many special laws have been enacted to protect ownership of land and the buildings which stand on the land.
You should realize whenever you buy/lease property that the owner who is selling it to you has extremely strong rights as do his family and heirs. Also, there may be others - in addition to the owner - who have "rights" in the property you are going to buy, perhaps governmental bodies, or contractors, for example.
Some of the things a title search uncovers are any unpaid taxes or mortgages, judgements against previous owners, easements, and many other court actions or recorded documents which can affect title to real estate.
We find and report such defects in the title to the real estate you wish to buy, so that these matters can be corrected and cleared up. it is the first benefit you receive when title insurance is ordered.

Abstracting... what is it?

When you purchase real estate, what you acquire is the seller's rights and interests subject to any limitations that may affect your ownership.

In virtually all land transfers, the seller's title is affected by the rights or interests of others. Examples are the right of a utility company to construct a power line across the property; rights of adjoining landowners to enforce covenants restricting use of the real estate; liens against the property by federal, state or local government, created to enforce tax and other liabilities; rights of a relative of a previous owner, and so forth.

It is essential that a prospective buyer be aware-before purchase-of what rights the seller is in a position to convey and who else may have an interest in the real estate that will affect a buyer's use and enjoyment of the property.

Throughout a number of states, especially Oklahoma, a form of evidence used to develop information for resolving land title questions is known as the commercial abstract. Sometimes referred to as a summary of public records relating to title to a specific parcel of land, an abstract typically is delivered to the seller or buyer under certificate and seal as to its content.

On the basis of information in the abstract, an attorney will render an opinion as to the condition of the seller's title, although, the attorney may have to obtain and analyze additional information.

Hidden Risks... What are they?

Protection from loss from claims on real estate which cannot be discovered by examination of the public records is the second part of the twofold benefit which Fidelity National Title provides.
For example, the title to the home which you have paid for - and to which you have recived a deed - could be threatened or lost by such circumstances as a forgery, confusion due to similar names, or error in the records. These contingencies will be covered in your policy of title insurance.

Title Evidence in an Abstract State... How is this different?

The traditional method of providing title evidence in Oklahoma for a buyer and/or lender has been and continues to be the letter-form title opinion based upon examination of an abstract of title. The format and content of title opinions varies among title examiners in Oklahoma. However, title opinions generally opine as to the record ownership of the subject property, set out the liens and encumbrances affecting the title, and specify the appropriate requirements to achieve a marketable title. In addition, the opinion will normally contain a list of matters not covered by the opinion and will indicate that no liability is assumed by the examiner as to these excluded matters.

In Oklahoma, title insurance is often utilized as the designated method of title assurance. In every instance, Oklahoma law requires that the title policy be based on examination of duly certified abstract of title. Title 36, Okla. Stat. 1991 Section 5001(c) This examination must be performed by an attorney licensed in Oklahoma. American Title Ins. Co. v. M-H Enterprises 815 P.2d 1219 (Okla. Ct. App. 1991) Consequently, the traditional process of the title examination and rendition of a title opinion forms the basis for the issuance of a title policy.

How does a Title Insurance policy protect against these dangers?

If a claim is made against your title as covered by your policy, Fidelity National Title protects you by:


1. Defending your title, in court if necessary, at our expense.
2. Bearing the cost of settling the claim if it proves valid, in order to perfect your title and keep you in possession of your property.

Summarizing, Title Insurance means this to you

It is assurance that every possible cloud on the title to the land you are buying - which can be discovered from the public records - has been called to your attention so that such defects can be corrected before you buy. And - it is insurance that, if any undisclosed claim covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed, exactly as your title insurance policy provides.

And you only pay once... When?

Unlike other forms of insurance, the original premium is your only cost as long as you own the property. There are no annual payments to keep your Owners Title Insurance Policy in force.