What is title insurance?
Title insurance offers you information on the status of the title to land before you buy – and protection against claims that may affect the title after you buy. Here’s how it works: Before your real estate transaction closes, the public records are searched to find all related official documents. These documents are then examined for their effect, and form the basis of the title insurance policy. The examination divulges the status of ownership and encumbrances. It shows the current record owner, based on a careful evaluation of all records. It also shows the current limitations on that owner’s property rights, such as other mortgages or utility easements. The buyer or lender knows that some of these limitations should be removed (by paying off and releasing a prior mortgage, for example), or the liens will continue to adversely affect the property, even after the closing.
What is a title?
The title is the foundation of property ownership. It is the owner’s right to possess and use the property.
What is an abstract? Doesn’t it tell about the property?
The abstract, is a rundown of the history of title to property as shown by the public records. Deeds, mortgages, other instruments and legal proceedings which have affected property through the years are all included in the abstract. If something is found in the abstract which affects a clear title, it is up to the owner and the owner’s attorney to clear it. If a clear title is not possible, it must be accepted as a limitation on your right of ownership. It is frequent for matters which seriously affect the title to be omitted in an abstract, because they are not shown in the public records.
Why buy title insurance?
Title insurance is necessary to protect one of the most important investments you’ll ever make – your home. The lender goes to great lengths to minimize the risk of lending you the money you need to buy or refinance your home. Your credit is checked as an indication of your ability to pay back your loan. Then, your lender goes a step further. They make sure of the quality of the title to the property you are about to buy and which you will pledge as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance. When a person buys consumer goods such as a car, they seldom need to know whether the former owner is married, single or divorced; whether they have paid their taxes or are involved in a lawsuit. But when a person buys a home it is necessary to have all that information. For while they may own the property, others may also have rights on it.
What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller’s right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property. First, a service known as a title search describes the condition and quality of the title to the land you are buying. Then, your title insurance protects you against mistakes or threats that might otherwise result in financial loss to you, including those hidden, unknown items. Your title insurance protection is a permanent assurance that your ownership and use will be defended promptly against claims at no cost to you, whether the claim is valid or not. Why is transferring the title to real estate different from transferring the title to other items, such as a vehicle? Land is permanent and can have many owners over the years, various rights in land (such as mineral, utility easements, or air rights) may have been acquired by other parties by the time you come into possession of it, even if the land has never before been built upon. In order to transfer a clear title to a piece of land, it is first absolutely necessary to determine whether any previous rights are outstanding and are still legally in effect.
What does title insurance cost?
The cost is relative to the value of the property. The higher the value, the more coverage is needed thus the higher premium. The premium is small compared to the total purchase price. The premium is paid once and is in force for as long as the property is owned by the insured and continues to protect the insured on warranties after it is sold.
How long does my coverage last?
For as long as you or your heirs retain an interest in the property and, in some cases, even beyond.
How does title insurance protect my investment if a claim should arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense – and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
If a lender has title insurance protection and you don’t, what possible danger of loss can you face?
For example, you’ve bought a home for $100,000. You’ve made a down payment of $20,000 and your lender holds an $80,000 mortgage or beneficial interest. The lender has title insurance coverage protecting his interest up to $80,000.
What risks call for title insurance protection?
Real estate has such great value and is so basic a form of wealth that many special laws have been enacted for its protection. As a result, the owner of land has exceedingly strong rights… and so do the family and heirs of the owner. However, others may have “rights” in the property as well. There are mortgage and leaseholder rights, liens due to unpaid taxes…lien claims to those whom the owner owes money…mining, oil or air rights…and many others. Anyone who has such a claim is, in a limited way, a part-owner. He or she cannot ordinarily be deprived of their interest except by having the claim settled or released. As a new owner you may know nothing about these risks, but you are still vulnerable to such claims on your property. That’s why you need an insurance policy from Vantage Point Title.
I thought my loan policy will protect me?
The loan policy protects the lender against loss due to unknown title defects. It also protects the lender’s interest from certain matters which may exist but may not be known at the time of sale. This policy only protects the lender’s interest. It does not protect you. That’s why you need an owner’s policy, which can be issued at the same time as the loan policy for a nominal one-time fee.
What if some matter arises affecting the past ownership of the property?
The title insurance company would only defend and protect the interest of the lender. You would have to assume the financial burden of your own legal defense. If your defense is not successful, the result could be a total loss of title.
What kinds of problems can a title search reveal?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Are there any problems that a title search cannot reveal?
Yes. There are some hidden hazards that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other hidden hazards include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you’ve purchased your home and can jeopardize your right to ownership.
If a builder of my home already has title insurance on the property, why do I need it again when I purchase the land from him?
A title policy insuring the builder does not protect you. Also, a great many things could have happened to the land since the builder’s policy was issued. Liens, judgments and unpaid taxes for which prior owners were responsible may be disclosed after you purchase the property – causing you aggravation and costing you money.
What is a title and what is involved in a title search?
The most accurate description of a title is a bundle of rights in real property. A title search is the process of determining from the public record just what these rights are and who owns them. A title search is the means of determining that the person who is selling the property really has the right to sell it, and that the buyer is getting all the rights to the property (title) that he or she is paying for. The process can be undertaken by a title company or a law firm. In most real estate transactions today, a loan policy is bought for the Lender. An Owner’s policy also can be purchased to assure the buyer that he or she has purchased a valid title.
What are the title company’s responsibilities in addition to conducting the title search?
Vantage Point Title will initiate and conduct a title search of the property upon the request of the lender, the realtor or the buyer depending on whether the purchase is being financed. The title search often reveals minor title problems that need to be corrected before title can be considered “clear”. Most such minor title problems can be corrected by obtaining and recording “corrective” documents at the appropriate registry of deeds. Unless there is a more serious title issue to resolve, which is not the usual case; the closing can take place within days of receiving the title search request.
What should we do to prepare for the closing?
Once you have entered into a purchase and sale agreement to buy a particular property, and applied for a mortgage loan to finance the transaction, your realtor, lender and the title company will be working toward putting the various pieces together. You should strive to answer any questions directed to you, and to provide any additional information that may be requested, as soon as possible so as not to delay your closing. Your lender will require that you provide, at time of closing if not before, a homeowners insurance binder evidencing coverage for the first full year as well as a receipt for payment of the first annual premium. It is certainly best to provide these items prior to closings. Once the Settlement Statement has been prepared, you should carefully review it. The last thing you will need to do before the closing is to obtain a bank or cashier’s check, for the total amount you will be asked to bring to closing. Also, don’t forget to bring a form of picture ID.
How Is Title Insurance Written?
Vantage Point conducts a search of the public records to create a history of the property. If local custom dictates, this history is set forth in a written abstract. One of Transcontinental’s title insurance professionals then examines the history or abstract to verify the seller’s right to transfer ownership of the property. This examination results in the creation of a commitment to issue title insurance, which summarizes the condition of title, including any defects or liens that must be addressed prior to closing. This commitment is then forwarded to your attorney, the seller’s attorney and the lender. The premium for your owner’s title insurance policy and the lender’s mortgage policy are paid at the time of closing.
The Owner’s Policy protects who?
Both the buyer and the seller.
The Mortgagee’s Policy protects who?
The lender.
Why the necessity of an Owner’s Policy and a Mortgagee’s Policy? Don’t they insure against identical loss and damages?
The Owner’s Policy insures that he is the owner up to the full purchase price of the property as long as he or his heirs owns the property. The Mortgagee’s Policy insures that the lender holds a valid lien on the property up to the unpaid balance of the loan. Owner and Mortgagee Policies cover the same hazards, but in very different dollar amounts; the Owner Policies cover up to the sale price paid. The Mortgagee Policies cover up to the loan amount.
Can a Mortgagee’s Policy be purchased without an Owner’s Policy?
Yes.
Wouldn’t a Mortgagee’s Policy protect the buyer as well as the lender?
Only to the extent the loan would be paid if there was a loss. There would be no equity protection to the buyer.
In general, what isn’t the owner protected against?
Actions of the government and items he as an informed purchaser should know about, such as who is in possession, or an object such as a power pole in the middle of the yard.
In general, what are the exceptions?
Specific easements, restrictions, the mortgage, etc.
Who establishes the title insurance premium rates?
It is a filed rate adopted by the Department Insurance Commission of the state. The rating rules are very strict and violations result in suspension of licenses.
When is a policy terminated?
Actually, never. Even though the insured sells the property and goes out of title, he still has an obligation by virtue of the warranties in the deed he conveys the property with, and consequently, the policy insuring him still is in effect.
How does title insurance differ from other types of insurance?
While the function of most other forms of insurance is to protect the insured against losses arising out of unforeseen future events, the primary purpose of title insurance is to eliminate risks and prevent losses cause by defects in title arising out of past events.
