As a title company, you are likely to come across a variety of financing agreements when facilitating real estate transactions in Florida. Two such agreements that are commonly encountered are “subject to” and “creative financing” agreements. In this blog post, we’ll take a closer look at what these agreements entail and how they impact title searches and insurance.

Subject To Agreements

In a subject to agreement, the buyer takes over the existing mortgage on the property and assumes responsibility for making payments. The seller retains legal ownership of the property until the mortgage is paid off, at which point ownership transfers to the buyer. This type of agreement is commonly used when the seller is unable to sell the property for the full amount owed on the mortgage.

When dealing with subject to agreements, it is important to conduct a thorough title search to ensure that the mortgage is the only outstanding lien on the property. Any other liens or encumbrances could complicate the transfer of ownership and potentially result in losses for the title insurance company. Additionally, it is important to obtain a payoff statement from the lender to determine the exact amount owed on the mortgage, as this will impact the final sale price.

Creative Financing Agreements

Creative financing agreements are any type of financing agreement that deviates from the traditional mortgage or cash purchase. Examples of creative financing agreements include lease-to-own arrangements, seller financing, and land contracts. These types of agreements are typically used when the buyer is unable to obtain traditional financing due to a poor credit score or lack of funds.

When dealing with creative financing agreements, it is important to conduct a thorough title search to identify any potential issues that could arise during the transfer of ownership. For example, if the seller retains legal ownership of the property in a lease-to-own agreement, there could be issues if the seller were to file for bankruptcy or if there are disputes over the terms of the agreement.

Title insurance is also critical when dealing with creative financing agreements, as these types of agreements often involve higher levels of risk than traditional mortgages. It is important to work with a title insurance company that has experience in handling these types of agreements and can provide the necessary coverage to protect all parties involved in the transaction.

In conclusion, subject to and creative financing agreements are two types of financing agreements that title companies in Florida are likely to encounter. When dealing with these types of agreements, it is important to conduct a thorough title search and obtain the necessary payoff statements to ensure a smooth transfer of ownership. Additionally, working with an experienced title insurance company is critical to mitigate any potential risks associated with these types of agreements.