What is Title Insurance?
When you purchase a home, you are purchasing the title to that property that can be affected by rights and claims asserted by others which may limit the use of the property as well as the possibility of financial losses. Title insurance protects against different types of title hazards.
Legal Advice:
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Even if you have title insurance, you are encouraged to seek legal advice.
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The title insurance policy does NOT take place of legal counsel.
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In every real estate transaction, there are many matters not covered by your policy which require the advice of a qualified attorney.
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The coverage, the policy itself, the specific exclusions, your rights and obligations as a seller or purchasers, the tax consequences and others should all by fully discussed and explained by a qualified attorney.
What does a title company do?
A title company has two primary roles in a real estate transaction. Their first role is to do a title search and examination of the property and their second role is what is known as the escrow process.
With a title search and examination, the agents will do a careful search of the public records to see what documents there are that may affect the title to the property. These items may include mortgages, liens, unpaid taxes, easements and other restrictions which may encumber the property. Upon completion of the search and examination, a title insurance commitment is prepared which sets forth the requirements for establishing good and marketable title to the purchaser. The title commitment will also reflect any restrictions or other exceptions which may encumber the property.
The title company, through its escrow officers, will oversee the closing of the transaction and insure that all of the terms and conditions of the sales contract have been satisfied. The title company handles all of the disbursements within the closing and will make sure that all necessary documents have been executed at the completion of the transaction so the purchaser receives good and marketable title to the property.
After the closing, the title company will record all necessary documents, forward all payments to any prior lender and pay all parties who performed services in connection with the closing.
Title Services:
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Title Insurance
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Closing Services
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Escrow Services
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Property Profiles
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Title Searches
Why do I need title insurance?
Under our American system, any interest in land must be recorded in the public records if the interest holder wants to be protected. Once it has been recorded, all subsequent parties are presumed to know of its existence since it is on the public record for all to see. Therefore, public records must be thoroughly searched to determine ownership of any piece of land at any given time. Title insurance ensures that there are no outstanding debts, mortgages or liens against it.
Out of the millions of documents on record, it is imperative that a prospective buyer or lender find all those which affect the title of their parcel. This is the charge of experts who specialize in this field. These highly trained, skilled professionals have access to carefully prepared, well-maintained indexes, which enable them to make a thorough, extensive search of the records in a fraction of the time it might take a layman to search and certify their findings.
Unfortunately, there are many instances of title defects, such as forged documents, improper filings and documents executed by legal incompetents, which even the most painstaking search of the records would not disclose. Consequently, the ultimate protection is the policy of the title.
What are the different types of policies?
Owner's Policy:
An owner's policy protects the interest of the owner of the real estate and lists the names of the new buyer as the insured party. As the new buyer, you will want assurance from the seller that the title is marketable and free from liens that could cause problems in the event you decide to sell or refinance in the future. The owner's policy assures that the title is marketable and provides for defense of the title as the expense of the insurance company, should it be questioned by others. The owner's policy is typically mailed directly to the new owners, unless otherwise specified.
Mortgage Policy:
A mortgage policy protects the interest of the mortgage lender and lists the lender as the insured party. All lenders require the borrower to provide proof and assurance that the loan being applied for will be in the correct lien position. If the validity of the lien is challenged, the policy provides for the defense of the mortgage interest. The mortgage policy is mailed directly to the lender.
What's the difference and do I need both?
The owner's policy is always in the full face amount and continues as long as the owner or their heirs have interest in the property. The mortgage policy protection terminates immediately when the loan is paid off along with all liens in the title to the property. As long as there is a lender involved, both policies are required. It is customary for the seller to incur the cost of the owner's policy and the buyer to incur the cost of the mortgage policy.
What is the cost of title insurance?
The cost of title insurance depends on the face amount of the policy issued. The face amount in an owner's policy is typically the market value of the real estate and the face amount in a mortgage policy is the amount of the loan issued.
Only one premium is paid and the protection last as long as the insured has any interest in the property. Upon sale or transfer of the property, an existing owner's policy will be issued protecting the new purchaser at a reduced premium. When an owner's policy and mortgage policy are issued simultaneously on the same land, special rates are applicable.