Need and Value
is Title Insurance?
Insurance is actually a process, with the insurance policy being the end
product. This process starts with a comprehensive search of public records to
determine if any liens or other encumbrances are attached to the title. During
the search, detailed information from potentially hundreds of sources is
gathered and reviewed, including tax records, federal, state and local records,
court judgments, deeds and an evaluation of weather the property
characteristics are accurately reflected by the information on the title. Not
surprisingly, one in four title searches uncovers some problem that must be
rectified prior to the close.
kind of Problems?
are four primary categories that can cloud a title and result in significant
risk for a prospective homebuyer. The title search meticulously seeks out and
evaluates any known indication of any of these issues; however, even the most
comprehensive search may not uncover every hidden area of risk:
can be placed against a title by any party with an unpaid financial obligation
against the property owner. The nature of these claims can be everything from
unpaid child support or alimony to unpaid parking tickets, taxes or bills from
contractors like electricians or plumbers.
may have occurred during the course of previous ownership changes that could
have included recording errors, typographical errors, incorrect legal
descriptions, incorrect indexing of land records or title search errors
resulting from undisclosed issues like unsatisfied claims not shown on public
against the property may come from missing heirs or heirs born after the
execution of a will, the dower or courtesy rights of spouses or former owners,
claims from ex-spouses or even from government or corporate entities. They can
also arise when the mental competence of a grantor of deed is called into
question; when wills are not properly probated or are misinterpreted; when a
title was transferred by a minor; or when a grantor of a deed did so while
under undue influence.
activity such as forged signatures or fraud in the execution of documents, the
use of false powers of attorney in the execution of documents, false
impersonation by someone claiming to be the owner of the property or any other
fraudulent activity can invalidate any title work that occurred from that point
buyers should be certain they know what issues affect the title of the property
they plan to buy and recognize that even new construction properties can be
subject to these same kinds of problems. Buyers should make sure that all
issues that come to light from the title search are adequately resolved prior
to the closing.
does title insurance cover?
the title search has been concluded and curative work to resolve any issues has
been completed, title insurance can then be issued. The title insurance policy
protects policy owners against covered financial losses associated with claims
against the title that were not discovered during the title search
process. It also insures against the
title being rejected by the subsequent buyer of your property due to
pre-existing title defects and covers losses that may arise after the property
is sold if title covenants were included in the sales contract. This includes
attorney fees and costs associated with defending the title and insures that
the policy holder is the legal owner and has access to the exceptions (such as
conditions, utility and other easements or set-back requirements), policy
owners must carefully read the coverage information for their specific policy
is covered by title insurance?
are two different kinds of title insurance policies, and each covers a specific
type of policy owner:
(or Loan) title polices are required by lenders and paid for by the borrower(s)
at the closing. However, these policies only protect the lending institution in
the event of a title problem is later uncovered and causes a financial loss.
Lender title insurance covers institutions up to the amount of the mortgage
loan associated with the property, but makes no provision for the borrower’s
title policies are not required for homebuyers, and in many jurisdictions an
Owner’s policy is not offered during the mortgage process. As a result,
homebuyers are left without title risk coverage and often don’t know they had a
choice. Without an Owner’s policy, homebuyers must pay for title curative work
out-of-pocket and the equity they have in their property can be at risk.
However, with an Owner’s title insurance policy in effect, the homeowner’s
investment is fully protected since the policy usually covers buyers up to the
full sale price.
title policies and Owner’s title policies cover many of the same things. In
both cases, the policy holders are protected from title risks such as title
search errors, claims by missing heirs or ex-spouses, forged signatures in the
chain of title and many other title problems that could go undetected before
the close. Attorney fees and settlement costs are also covered up to the policy’s
does title insurance cost?
states set the rates for title insurance and major lenders may be able to
secure volume-based rates for their borrowers. Homebuyers should always feel
free to shop policy coverage and rates before making their final choice.
other types of insurances that require ongoing payments, title insurance covers
things that happened in the past (prior to the closing) that could affect the
status of the property’s title. There is a one cost for title insurance at the
time of the closing and the policy is good for as long as homebuyers or their
heirs own the property.