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Understanding Real Estate Release in Title: A Comprehensive Guide

In real estate, transactions are often complex, involving numerous legal and financial processes. One of these critical aspects is the “release in title.” Though less widely discussed than others in real estate, this term is vital in transferring property ownership and resolving financial claims. In essence, a real estate release in title involves clearing, or “releasing,” a title of any encumbrances, liens, or claims, allowing for a smooth transfer of ownership. This article delves into what a real estate release in the title means, it’s types, how it functions, and it’s significance in property transactions.

What is a Real Estate Release in Title?

A release in the title is a legal process that removes any claim or lien attached to a property, allowing the owner to transfer the property without the encumbrances tied to it. Encumbrances are claims, liens, or other restrictions that could impact the property’s ownership rights. For instance, if a homeowner has an outstanding mortgage, the lender usually places a lien on the property. Only after the mortgage is paid off can the title be “released” from this lien, which removes the lender’s claim to the property.

This release often occurs during refinancing, home sales, or situations in which the property owner has met specific conditions, such as completing mortgage payments or settling outstanding debts tied to the property. Ensuring a clear title is crucial because it reassures buyers that they won’t inherit any unresolved financial obligations or legal claims on the property.

Types of Releases in Title

The nature of the release required depends on the type of encumbrance on the property. Here are some common types of releases in the title:

Mortgage Release

When a property owner repays their mortgage, the lender issues a release of the mortgage lien. This means that the lender’s claim on the property is terminated, allowing the owner to have a title free from that mortgage claim. Mortgage releases are recorded in the county’s public records, documenting that the property no longer has an active mortgage lien.

Mechanic’s Lien Release

Contractors or suppliers can file a mechanic’s lien on a property if the owner fails to pay for services or materials. Once the payment is settled, the contractor issues a mechanic’s lien release, which removes the claim. This type of release is essential for ensuring that contractors do not hold claims on the property when it’s sold.

Tax Lien Release

If property taxes are overdue, the government imposes a tax lien. Once the debt is paid, the government releases the lien, freeing the property from this encumbrance. This release is crucial since a tax lien can make selling or transferring property ownership challenging.

Easement Release

An easement grants another party limited rights to use a property for specific purposes (such as utility companies needing access for maintenance). In some cases, if the easement is no longer needed, the easement holder can release it, removing the encumbrance from the title.

Judgment Lien Release

Judgment liens result from court orders that enforce a lawsuit’s debt payment. If the debt is paid or settled, a judgment lien release can be obtained, clearing the lien from the property title. This type of release ensures that the property is no longer subject to lawsuit claims.

How Does the Release in Title Process Work?

The release in title process generally involves several steps to verify that the obligations tied to the property are settled, followed by recording the release in public records. Here’s a basic breakdown of the process:

Satisfaction of Debt or Obligation:

The first step is to satisfy any outstanding debt tied to the property, such as paying off a mortgage or a tax lien. Once the financial obligation is met, the party that holds the claim (e.g., lender, contractor, or government agency) is required to issue a release.

Requesting the Release:

The property owner or their legal representative then contacts the lienholder or the entity that holds the encumbrance, requesting that they release the title. This often involves submitting proof that the debt or obligation has been paid.

Documentation and Recording:

Once the lienholder confirms payment, they prepare a release document, sometimes called a “satisfaction of lien” or “discharge of mortgage.” This document is typically filed with the county recorder’s office or other local government authority to update public records. Recording the release document officially clears the title of the lien.

Title Update:

After the release is recorded, title companies can update their records to reflect a clear title. This updated title makes transferring ownership or refilling the property easier without encumbrances.

Importance of a Real Estate Release in Title

Ensuring a clear title is essential for both buyers and sellers. Here’s why a release in title matters:

  • Protecting Buyers from Future Claims: A release ensures buyers won’t inherit any financial liabilities. New owners could face unexpected costs without a release if previous liens resurface.
  • Facilitating Smooth Transactions: A clear title is usually a prerequisite for property sales. Title issues are among the leading causes of delayed real estate transactions. By securing releases, sellers can expedite the closing process.
  • Improving Loan Approval: Lenders require a clear title to approve mortgages, as they do not want to invest in a property with existing claims. A title release simplifies the lending process, making it easier for buyers to secure financing.
  • Avoiding Legal Issues: Properties with encumbrances can lead to legal disputes if buyers discover unresolved claims post-purchase. Ensuring title releases mitigates the risk of future legal complications.

Common Challenges in Real Estate Release in Title

While the process may seem straightforward, challenges can arise. Some common issues include:

  • Delayed Documentation: Lienholders may delay issuing release documents, slowing the sale or refinancing process.
  • Errors in Public Records: Mistakes in recording or updating public records can confuse, leading to incorrect liens appearing on the title.
  • Unresolved Debts: Property owners may be unaware of minor claims, such as small tax liens or unpaid contractors. Discovering these encumbrances during a title search can delay the release process.
  • Locating Lienholders: In cases where properties have changed hands multiple times, locating the original lienholder can be challenging. This is especially common for older mortgages or judgments that were not recorded properly.

Ensuring a Smooth Release Process: Best Practices

Whether buying or selling property, a few proactive steps can help ensure a smooth release process:

  1. Conduct Regular Title Searches: Property owners should periodically conduct title searches, particularly before selling or refinancing, to identify and resolve any unknown encumbrances.
  2. Keep Thorough Financial Records: Maintain all records related to property payments, including mortgage payoffs, tax payments, and contractor invoices. These documents serve as proof when requesting a release.
  3. Work with a Title Company: Title companies are experts in clearing titles and can assist in locating lienholders, verifying payments, and recording releases in public records.
  4. Consult Legal Professionals: Attorneys specializing in real estate can provide valuable guidance, particularly if you encounter complex liens or legal claims on a title.

Conclusion

A real estate release in the title is essential to any property transaction, ensuring the property’s title is clear of claims and ready for a new owner. From satisfying outstanding debts to recording the release in public records, this process provides peace of mind to both buyers and sellers by preventing future financial or legal complications. Understanding and following best practices, property owners can navigate the release process smoothly, ensuring successful and secure property transactions.

 

 

Learn more about our comprehensive title insurance services here.

 

Thank you for reading! If you enjoyed this article and want to explore more content on similar topics, check out our other blogs at Sonic Loans, Sonic Realty, and Sonic Title. We have a wealth of information designed to help you navigate the world of real estate and finance. Happy reading!

 

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Understanding Real Estate Release in Title: A Comprehensive Guide

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Recordings in Title: What They Are and Why They Matter

In real estate transactions, “recordings in title” refer to the official documentation of various legal interests, rights, and claims associated with a property. These recordings provide an accurate and publicly accessible record of a property’s ownership history and related rights, like liens or easements. Understanding the importance of recordings in title is crucial for anyone buying, selling, or managing real estate, as these documents help establish clear ownership, protect buyer and lender interests, and prevent disputes.

This article will explore the recordings in the title, the types of documents commonly recorded, the process involved, and why recordings are essential for protecting property rights.

What are Recordings in Title?

Recordings in the title are legal documents filed with a government office, typically the county recorder or land records office, which outline interests and claims on a piece of real estate. These recordings serve as the official and public record of a property’s history. Whenever a title-related document is recorded, it becomes part of the public domain, meaning anyone can access it to verify ownership, check for liens, or see past transactions.

Recorded documents help create a “chain of title,” which is the sequence of historical ownership of a property. This chain of title is essential for establishing the property’s legal owner and verifying that ownership transfers have been adequately documented.

Why Recordings in Title are Important

Recording title documents is vital because it:

  • Establishes Ownership: Recorded documents prove ownership and create a public record. This helps prevent disputes by establishing a clear record of who holds ownership rights to a property.
  • Protects Buyers and Lenders: Buyers and mortgage lenders rely on recordings to verify that the seller has a clear title to the property. The process helps protect buyers from potential legal issues, such as unknown liens or ownership disputes.
  • Ensures Legal Transparency: By making property records public, title recordings promote transparency and allow anyone to examine a property’s legal history.
  • Creates a Chain of Title: A clear and unbroken chain of title is essential in proving a property’s ownership history. Missing or inaccurate records can complicate transactions and lead to costly disputes or legal challenges.

Common Types of Recorded Documents in Title

Several types of documents are commonly recorded as part of the title. Here are the most significant ones:

  • Deeds: A deed is the primary document that transfers property ownership from one party to another. When a property is sold or gifted, a deed is recorded with the local land records office to establish the new owner’s legal claim.
  • Mortgage and Deed of Trust: When a property is financed through a loan, the mortgage or deed of trust document is recorded to show the lender’s interest in the property. This document specifies the borrower’s obligations and outlines the lender’s right to foreclose if the borrower defaults.
  • Liens: Liens are claims on a property for unpaid debts, such as taxes or contractor fees. Typical liens include tax liens, mechanic’s liens, and judgment liens. These must be recorded to be enforceable, and potential buyers or lenders must be informed of outstanding debts tied to the property.
  • Easements: An easement grants a third party limited rights to use a portion of the property. Easements are common for utilities, shared driveways, and pathways. Recording an easement provides a permanent public record of these rights and obligations.
  • Covenants, Conditions, and Restrictions (CC&Rs): Often associated with properties in subdivisions or planned communities, CC&Rs are rules that govern what property owners can or cannot do with their land. Recording these documents makes the restrictions binding on future property owners.
  • Satisfaction of Mortgage: When a borrower fully repays a mortgage loan, a satisfaction of mortgage document is recorded to show that the lender’s interest in the property has been cleared. This is also known as a “release of lien” or “reconveyance.”

The Recording Process

The recording process ensures that property transactions and interests are legally documented and publicly available. Here’s a typical step-by-step overview:

  1. Preparation of Documents: First, documents like deeds, mortgages, or liens are prepared by the involved parties, usually with the help of legal or real estate professionals.
  2. Notarization: Most documents require notarization to verify the identity and intent of the parties involved. A notary public witnesses the signing and provides a notary seal.
  3. Submission to the County Recorder’s Office: Once prepared and notarized, documents are submitted to the county recorder’s office or land records office in the property’s jurisdiction.
  4. Verification and Recording: The recorder’s office reviews the documents for accuracy and adherence to local requirements. If everything is in order, the documents are recorded and given a unique recording number, which is added to the public record.
  5. Return of Recorded Documents: After recording, the original documents are typically returned to the party that submitted them. In the case of a mortgage, the lender usually retains a copy.
  6. How Recordings in Title Protect Real Estate Transactions

Recordings play a crucial role in safeguarding real estate transactions. Here’s how:

  • Provides Clear Ownership: Recordings establish clear ownership, ensuring that the seller is the legal owner and has the right to transfer the property. This helps prevent potential ownership disputes during a sale.
  • Alerts Buyers and Lenders to Encumbrances: Recordings reveal any encumbrances, such as liens or easements, which might affect the property’s value or usability. Buyers and lenders can review these recordings to assess potential risks.
  • Enables Title Insurance: Title companies conduct title searches based on recorded documents to determine if any issues could affect the buyer’s ownership rights. Based on this information, they issue title insurance, protecting buyers and lenders against hidden title defects.
  • Recording title documents ensures compliance with local laws governing property rights and transfers. This helps prevent legal issues arising from unrecorded or improperly documented transactions.

Potential Issues with Recordings in Title

Despite its importance, the recording process can sometimes be complicated by specific issues:

  • Unrecorded Liens or Documents: Sometimes, liens or other documents may need to be correctly recorded, creating potential legal disputes. For instance, an unrecorded lien might still be enforceable, but buyers wouldn’t know it during a title search.
  • Errors in Recording: Mistakes in recorded documents, such as misspelled names or incorrect property descriptions, can disrupt the chain of title and lead to ownership disputes.
  • Fraudulent Recordings: In rare cases, fraudulent documents may be recorded, creating a false claim of ownership. This is why title insurance and vigilant record-keeping are essential.

Conclusion

Recordings in title are vital for establishing ownership, protecting buyers and lenders, and ensuring legal transparency in real estate transactions. By documenting essential details about ownership, liens, easements, and other rights, these recordings provide a clear picture of a property’s legal history and establish a framework for smooth and legally sound property transfers.

Understanding recordings in title can help prevent potential issues and ensure a secure and well-documented property transaction for anyone involved in real estate, whether as a buyer, seller, lender, or investor.

 

Learn more about our comprehensive title insurance services here.

 

Thank you for reading! If you enjoyed this article and want to explore more content on similar topics, check out our other blogs at Sonic Loans, Sonic Realty, and Sonic Title. We have a wealth of information designed to help you navigate the world of real estate and finance. Happy reading!

 

Grid 1

Understanding Real Estate Release in Title: A Comprehensive Guide

In real estate, transactions are often complex, involving numerous legal and financial processes. One of...

Recordings in Title: What They Are and Why They Matter

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Reinsurance in Title: An Essential Safeguard for the Title Insurance Industry

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Real Party in Title: Understanding the Key Legal Concept

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Quit Claim Deed: An In-Depth Exploration

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Prescriptive Easement in Title: What You Need to Know

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Reinsurance in Title: An Essential Safeguard for the Title Insurance Industry

The title insurance industry plays a vital role in real estate transactions by protecting lenders and property owners from potential losses related to title defects, liens, or ownership disputes. To manage the financial risks associated with issuing title insurance policies, title insurance companies often use a strategy known as reinsurance. Reinsurance in title insurance is a risk management tool that allows primary insurers to share or transfer portions of their risk to other insurance companies, ensuring they can cover large claims without destabilizing their operations.

This article will explore reinsurance, its importance to the title insurance industry, its workings, and its benefits to insurers and consumers.

Understanding Reinsurance

Reinsurance is essentially “insurance for insurance companies.” It allows an insurance company (the ceding insurer or primary insurer) to pass on a portion of its risk to another insurance company (the reinsurer). In return for taking on some of this risk, the reinsurer receives a share of the premium paid by the insured.

In the context of title insurance, reinsurance is especially beneficial because title insurers cover significant financial risks over the long term, potentially facing large claims if major title issues arise. By transferring part of the liability to a reinsurer, a title insurance company can improve its financial stability and capacity to underwrite more policies, thus making title insurance more widely available.

Why Reinsurance is Important in Title Insurance

The unique nature of title insurance makes reinsurance an essential risk management tool for several reasons:

  • Significant Potential Liabilities: Title insurance policies often cover substantial amounts, especially in commercial real estate transactions, where the insured value of properties can reach millions or even billions of dollars. With reinsurance, covering claims on such high-value properties would be financially safe.
  • Long-Term Coverage: Unlike other types of insurance, which are often renewed annually, title insurance provides coverage for as long as the insured party is interested in the property. This indefinite coverage period makes it difficult for title insurers to predict when or if a claim might occur, adding uncertainty to their risk exposure.
  • Complex Title Issues: Title issues can be complicated, involving disputes over boundaries, encroachments, unrecorded liens, or fraudulent transfers. Suppose an insurer finds itself exposed to numerous claims on such issues. In that case, reinsurance offers a safeguard by sharing the risk load with other insurers.
  • Financial Stability: By partnering with reinsurers, title insurers enhance their economic stability, enabling them to continue operating effectively despite unexpected or catastrophic losses. This stability also reassures regulators, investors, and policyholders.

How Reinsurance Works in Title Insurance

The reinsurance process in title insurance typically follows these steps:

  1. Assessing the Need for Reinsurance: The primary title insurer determines whether a particular policy or group of policies requires reinsurance. This decision is usually based on the potential liability associated with the policy’s insured value and the insurer’s capacity to handle claims.
  2. Selecting a Reinsurer: The primary insurer then finds a reinsurer willing to take on part of the risk. Reinsurers are often large, specialized companies with the financial resources to cover substantial claims.
  3. Negotiating Reinsurance Terms: The two parties agree on the specifics, including the percentage of risk transferred, the reinsurer’s share of the premium, and the types of claims or circumstances under which the reinsurer would be liable.
  4. Transferring Risk: Once the terms are agreed upon, the primary insurer cedes a portion of the risk to the reinsurer, allowing both companies to share the liability if a claim arises.
  5. Claim Settlement: The primary insurer usually handles the initial settlement process if a claim is filed. However, suppose the claim exceeds certain financial thresholds or falls under the terms of the reinsurance agreement. In that case, the reinsurer will contribute to the payment.
  6. Types of Reinsurance in Title Insurance

Title insurers use various types of reinsurance agreements depending on the level of coverage needed and the nature of the risks involved. The most common reinsurance types are:

  • Proportional Reinsurance: In proportional reinsurance, the primary insurer and the reinsurer agree to share the premiums and losses on a specified percentage basis. For instance, in a 50-50 arrangement, the reinsurer would receive half of the premium and, in return, cover half of any claims.
  • Non-Proportional Reinsurance: In non-proportional reinsurance, the reinsurer only pays if the primary insurer’s losses exceed a predetermined amount, known as the retention or deductible. This approach is often used for high-value policies where the primary insurer wants to limit its exposure to catastrophic losses.
  • Facultative Reinsurance: This type of reinsurance is arranged for individual policies, usually for high-value or complex transactions. It allows the primary insurer to transfer risk on a case-by-case basis based on each policy’s specifics.
  • Treaty Reinsurance: In treaty reinsurance, the primary insurer and reinsurer agree on a blanket contract that covers an entire category or portfolio of policies. This arrangement streamlines the reinsurance process, as the primary insurer does not need to negotiate separate reinsurance agreements for each policy.

Benefits of Reinsurance in Title Insurance

Reinsurance provides significant benefits for all parties involved in title insurance:

  • For Title Insurers, Reinsurance reduces financial exposure, enabling them to cover larger policies and manage risk more effectively. It also allows them to take on high-value or high-risk policies that they might otherwise decline, thus expanding their business.
  • For Reinsurers: By partnering with title insurers, reinsurers diversify their portfolios, adding real estate-related risk to their other insurance sectors. This diversification can help reinsurers spread out their risks across different industries.
  • For Consumers and Lenders: Reinsurance bolsters the title insurer’s financial stability, providing peace of mind for property buyers and mortgage lenders. Knowing that the insurer has reinsurance in place makes claims more likely to be paid promptly, even if they are substantial.
  • For the Real Estate Market: Reinsurance helps ensure that title insurance remains accessible and affordable, supporting the overall health of the real estate market. Without reinsurance, fewer title insurers can cover high-value transactions, which could reduce liquidity in the market.

Challenges in Title Reinsurance

While reinsurance is a valuable tool, it also presents specific challenges:

  • Complex Negotiations: Reinsurance agreements require extensive negotiation, as the parties must agree on the specific terms and conditions of coverage. This complexity can make reinsurance costly and time-consuming.
  • Dependence on Reinsurer’s Financial Health: If the reinsurer faces financial difficulties, the primary insurer may not receive the support it expected, potentially affecting its ability to pay claims.
  • Regulatory Compliance: Reinsurance agreements must comply with state and federal regulations, which vary widely. Ensuring compliance can add to the administrative workload for both insurers and reinsurers.

Conclusion

Reinsurance in title insurance is a vital mechanism that enhances title insurers’ financial stability and risk management capabilities. By transferring portions of risk to larger reinsurers, title companies can take on more substantial policies, safeguard their operations against large claims, and continue to provide consumers and lenders with essential protection during real estate transactions.

For anyone involved in real estate, from individual homebuyers to commercial investors, reinsurance within the title insurance industry adds an extra layer of security and stability to the property market.

Learn more about our comprehensive title insurance services here.

 

Thank you for reading! If you enjoyed this article and want to explore more content on similar topics, check out our other blogs at Sonic Loans, Sonic Realty, and Sonic Title. We have a wealth of information designed to help you navigate the world of real estate and finance. Happy reading!

 

Grid 1

Understanding Real Estate Release in Title: A Comprehensive Guide

In real estate, transactions are often complex, involving numerous legal and financial processes. One of...

Recordings in Title: What They Are and Why They Matter

In real estate transactions, “recordings in title” refer to the official documentation of various legal...

Reinsurance in Title: An Essential Safeguard for the Title Insurance Industry

The title insurance industry plays a vital role in real estate transactions by protecting lenders...

Real Party in Title: Understanding the Key Legal Concept

The “Real Party in Title” concept is an essential aspect of property law that determines...

Understanding Reconveyance in Title: A Comprehensive Guide

Reconveyance in the title refers to the legal process by which a lender transfers the...

Quit Claim Deed: An In-Depth Exploration

A quit claim deed is a legal instrument that allows a person to transfer their...

Purchase Money Mortgage: A Comprehensive Guide

A purchase money mortgage is a vital financial instrument in real estate transactions. It refers...

Principal in Title: Understanding the Role and Significance

Legal terms and concepts can sometimes be confusing in the world of real estate, but...

Prescriptive Easement in Title: What You Need to Know

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Affiliated Business Arrangement Disclosure Statement
This is to give you notice that Sonic Loans Inc., Sonic Title Agency LLC, and Sonic Realty LLC have a business relationship. The nature of the relationship between the Referring Party and the provider(s), including percentage of ownership interest, if applicable, is: Sonic Loans Inc., Sonic Title Agency LLC, and Sonic Realty LLC are all 100% owned by the same party. Because of this relationship, this referral may provide any of the above parties with financial or other benefit.
A. Set forth below is the estimated charge or range of charges for the settlement services listed. You are NOT required to use the listed provider(s) as a condition for settlement of your loan on, or purchase, sale, or refinance of, the subject property.
THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES.
Provider and Settlement Service Charge or Range of Charges
Sonic Realty LLC 1%-6% of purchase price
Sonic Title Agency, LLC Title Insurance Policy: $950 - $1706 on a $250,000 property. (Rates vary and are dependent on the state, selling price, and loan amount on the property.)
Title Search Fee: $250 - $325 (where applicable)
Closing Fee: $450 - $650
Sonic Loans Inc.

This company provides various real estate mortgage loan origination activities either as a third-party originator or a mortgage broker, including loan pre-qualification, competitive bid process (when providing third-party origination services), loan origination, loan pre-approval, loan structuring, processing, and closing.

Loan Origination Charge: 0-3 % of loan amount (may include 3rd party fees)
Loan Discount Fee/points: 0.5%-6% of loan amount.
Application/Processing Fee: $0.00 - $875.00
Flood and tax service: $0.00 - $95.00
Underwriting Fee: $0.00 - $1295.00
Document Review Fee: $0.00 - $400.00
Appraisal Fee: $0.00 - $850.00
Credit Report Fee: $0.00 - $135.00

Actual charges may vary according to the particular lender selected, the particular services provided, and the underlying transaction, borrower selections, etc. Some or all of these fees may be charged by third parties and/or the Member Mortgage Lender/Mortgage Broker. The Member Lenders and Mortgage Brokers have agreed to pay a fee ranging from 0.5% to 2.75% of the loan amount to Sonic Loans in connection with a range of loan origination services provided by Sonic Loans to the Member Lender/Mortgage Broker. The fees are paid either directly to Sonic Loans by the Member Lender/Mortgage Broker or billed directly to you at closing.
B. Set forth below is the estimated charge or range of charges for the settlement services of an attorney, credit reportingagency, or real estate appraiser that we, as your lender, will require you to use, as a condition of your loan on this property, to represent our interests in the transaction.
Sonic Loans Inc. provides mortgage lender/broker services. Sonic Realty LLC provides real estate brokerage services. Sonic Title Agency LLC provides title insurance and settlement services.

Provider and Settlement Service Charge or Range of Charges
Appraisal Fee $0-$800
Credit Report Fee $63-$125
 Actual charges may vary depending on the lender and loan program selected which can be found on your loan estimate.

ACKNOWLEDGMENT

I/we have read this disclosure form and understand that Sonic Loans Inc., Sonic Realty, LLC, or Sonic Title Agency LLC are referring me/us to purchase the above-described settlement service(s) and may receive a financial or other benefit as the result of this referral.