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Protection of one of your biggest investments! If you are purchasing a new home, it’s wise to make sure an Owner’s Title Policy of Insurance is provided to you at closing, as well as providing a Lender’s Title Policy of Insurance to the Lender financing the home, if any. When you are buying a home or land, you are buying a piece of earth that has been owned by others before you. With over 100* types of "title defects", you will want to make sure you have 100% ownership of the property you are buying and that the property is also free and clear from any potential claims that may arise after you own the property. Unlike automobile insurance that protects from a future event, title insurance will protect you from any events that have occurred in the past.
The title company that handles your closing will issue the title policies. Similar to a life insurance policy requirement, in which you are required to take a medical physical, your property will undergo a thorough search of the public records at the county recorder’s office. Any title defects found will be disclosed to you and will require clearing before the closing date. Sometimes these title matters can be cleared easily by the title agent or an attorney may be required for legal process. You are probably thinking, if my property has gone through a thorough search at the county recorder’s office and all matters, if any, have been cleared, why do I need the policy of insurance? This is because claims can arise from many sources, some of which may not show up in public records. If a claim does arise, and you have an Owner’s Title Policy, your Title Agent and Underwriter will be ready to defend you in court, if necessary, at no cost to you.
Depending on where you reside, the fee structure for these policies are all different. You may pay all, half or none of the premium due to the Title Agent for these Policies. The premium is a one time fee paid at closing. The Lender’s Title Policy will not cover the owner or buyer for any loss that may result out of a claim.
*Listed here are most common types of title defects:
- Missed Prior Judgment Lien, Mechanic Lien or Mortgage Lien from prior owners
- Pre-existing violations of deed restrictions
- Delinquent land, estate or federal taxes
- Fraud
- Improper document preparation or execution
- Ineffective release of interest by prior owner
- Ineffective release of Judgment Lien, Mechanic Lien or Mortgage Lien from prior or current owner
- Improper procedures of any court case relating to the property or a probate case involving an owner, such as a minor, incompetent person or deceased party.
The explanation provided above is designed to acquaint you with the Title Insurance process. Every title is unique and more complex than explained here. For further explanation of Title Insurance it is suggested you consult an attorney.
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