Title Insurance Helps Protect Your Real Estate Investment
What is title insurance?
Title insurance is an insurance policy that helps safeguard your property interests from losses that could occur if, following closing, you learn that another party can in some way lay ownership claim to your property.
What is a title search (examination) of a property?
A title search is a careful review or examination of all public records surrounding title (also referred to as “deed”) to a real estate parcel. The title examiner searches for and evaluates any previous deeds, trusts, or wills to ensure the title has conveyed properly to each new owner. The title examiner verifies that all judgments, mechanic’s liens, miscellaneous liens, and prior mortgages have been paid in full regarding the property in question.
A proper title search should reveal any potential concerns or obstacles, including property rights other individuals may hold (easements, right of ways, restrictions, mineral rights, and the like), claims by previous undiscovered heirs to the property, and lis pendens (pending legal actions).
What are “clouds” on title?
A “cloud” or “defect” on title is a problem that renders ownership questionable. This prevents the property from being insurable. Clouds or defects on title must be resolved prior to insuring the title to the property.
Should I still obtain title insurance if the title is clear?
Everyone is human! While the examination explores all areas of ownership, such as liens and property rights during the current ownership period and back 40 years prior, it is still critical to identify any mishandlings of information that may have occurred. Expert title examiners can miss a defect in title, or the clerk’s office could have improperly indexed information. Such a mishap could pose problems for the future of the property being examined.
What exactly falls under the coverage a title insurance policy provides?
A title insurance policy will protect the homeowner in the following ways:
- Protects the homeowner against losses due to title claims
- Covers potential attorney fees and costs in defending title
- Guards against clouds or defects on title that were not detected during the title examination or those inadvertently missed or overlooked by the examiner
- Mitigates errors in public records
What if title problems arise after closing?
In the event that complications with title become apparent following closing, the policy will cover your legal fees if you are required to defend your property in a court of law.
In the event you lose the property, title insurance will remunerate you for financial loss up to the amount of the policy.
What variations of title concerns or problems are not covered by title insurance?
A title insurance policy does not provide coverage for deficiencies or defects that occur following your purchase of the property. Title insurance policies typically do not cover problems or concerns associated with easements, liens, and mineral and air rights.
Am I required to purchase title insurance?
If working with a lender, you can expect to purchase title insurance, as they will require a lender’s title insurance policy to cover their interest. The homeowner can still be liable for title problems even though the lender is insured. Such a policy is based on the loan amount you borrow. If you are purchasing a home, a discounted rate is often provided for the lender’s title insurance if you have purchased owner’s title insurance.
An owner’s title insurance policy is provided to the buyer. Protecting the buyer for the entire time of ownership, it is based on the sales price of the home. This type of policy is crucial in today’s market, as many homes have been foreclosed on and continue to have marketability issues.
Why must I have owner’s title insurance?
There are a myriad of reasons to have an owner’s policy, the most important of which are listed here:
- Forgery
- Fraud in the execution of documents
- False impersonations
- Incorrect representation of marital status
- Wills improperly probated
- Incorrect legal descriptions
- Unsatisfied claims not shown in public records
- Incorrect indexing of land records
- Clerical errors in recording legal documents
- Recordation of deeds after the death of the grantor
An owner’s policy is a small price to pay for sound peace of mind.
To whom is each policy type issued? Which party receives remuneration in the event of a problem?
Lender’s Policy: Typically issued for the mortgage amount. A lender’s policy covers the lender’s interests and provides compensation if a problem arises.
Owner’s Policy: Covers the full sale price of the property and provides loss protection for the owner. In the event an issue arises, the owner’s attorney fees and similar costs are covered.
When and how often must I pay the title insurance premium?
Lender’s title insurance policies are charged with every transaction made to the associated property. Reissue rates are provided at each transaction as long as an owner’s policy was purchased.
Owner’s title insurance policy fees are incurred once when you purchase the property.
What if my home increases in value? Am I still covered?
Yes. An Enhanced Owner’s policy is offered and recommended. This policy is superior to the standard owner’s policy because its value increases as the property value increases. With a standard policy, the value of the policy remains at the sales price value from when you purchased the property. An Enhanced Owner’s policy protects you even as your home increases in value.
23 Reasons You Need Owner’s Title Insurance:
- Mechanic’s liens not yet of record
- Forgery
- Fraud/misrepresentation regarding the provision of documents
- Unwarranted influence on or persuasion over a former owner or executor
- False impersonation by individuals claiming ownership rights to the property
- Incorrect or misrepresentation of marital status of former owners
- Missing or undisclosed heirs to the property
- Mistaken interpretation of wills and trusts
- Wills improperly probated
- Mental incompetence of former owners, which may rule a sale void
- Conveyance by a minor or other person legally incompetent
- Birth of heirs succeeding the date of a will
- Inadequate or incomplete surveys
- Inadequate or incorrect legal descriptions or documentation
- Deeds not delivered properly
- Unsatisfied claims against the property not revealed on record
- Deed effected under expired, misrepresented, or false powers of attorney
- Misunderstanding or confusion over similar or identical names
- Dower, homestead/courtesy, or other marital rights of former spouses or former owners
- Incorrect indexing of deed
- Clerical omissions or errors in the recording of legal documents
- Delivery of deeds subsequent to the death of a former owner
- Real estate tax authority errors or omissions
Protect your real estate investment by purchasing title insurance. For more information on the benefits of title insurance and the consequences of neglecting to purchase such a policy, contact our experts at Linear Title & Escrow today or call 757-340-0340.
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