interests’ others have registered against the property, such as whether the land is subject to amortgage or a long-term lease agreement.Title insuranceis also an important factor in real estate transactions.Title insurance is a type of coverage for buyers and lenders that covers title-related issues (suchas fraudulent transfers and mortgages, liens, boundary encroachments, issues related togovernment regulation, zoning problems, survey defects, and registration issues) but does notprotect an insured from known defects with the property
Obligations of SellersAs outlined above, the principle of caveat emptor (let the buyer beware) applies generally to realestate purchases, meaning that it is the responsibility of the buyer to discover defects in theproperty. However, the seller must not mislead the buyer, must be honest when answeringquestions about the condition of the property, and has a positive duty to disclose significantlatent defects (not easily visible) that are known to the seller, especially if the defects cause theproperty to be dangerous or uninhabitable. Misrepresentations of sellers may consist of oral orwritten false statements but may also take the form of active attempts to rude defects in theproperty being sold. However, the buyer must show that the misrepresentation is material- thatis, that it was an important factor in the decision to buyFinancing the Purchase of Real Estate-A purchaser usually needs to borrow funds, may make the offer to purchase conditionalupon securing financing, then approach lenders.-The purchaser and lender will negotiate a mortgage contract.-If no lender will lend, the purchaser can terminate the purchase offer.Mortgage: A contract for the extension of credit, a debt owed by the purchaser (mortgagor) to itsbank (mortgagee).-The bank registers the mortgage document to attain security protection against any otherclaims for the landFirst, a mortgage is a contract for the extension of credit and is a debt owed by the purchaser toits bank. The borrower is known as the mortgagor and the lender is known as the mortgagee. Thelender advances the principal sum to the borrower, who promises to repay the principal plusinterest over the specified period.Secondly, the lender will take a security interest in the property itself. To attain this securityprotection, the bank must register the mortgage document, thereby giving notice to allsubsequent creditors of the purchaser- as well as anyone considering purchasing the propertyfrom purchaser- that the bank has first claim against the land. Registration gives the bank securedstatus, which will protect its claim against the land even if the borrower becomes bankrupt. If thepurchaser is a corporate borrower, the lender may also require additional security such aspersonal guarantees, an assignment of rents, or a general security agreementIn a land titles system, mortgage registration puts a claim (lien) on the land until repayment iscomplete.
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