What is a Title?
When you purchase a home, you are really purchasing the title to the property – which is the right to occupy and use the property. That legal right is usually documented in the form of a deed recorded at the local courthouse. A title may be contested based upon past righs and claims asserted by others. These types of claims can complicate your purchase of the property, or challenge your ownership later on, and potentially cause you to lose money.
Why do you need title Insurance?
A home is often the largest single investment any of us ever make. Title insurance protects against loss of value from defects that may exist in the title, or arguments made by others that such defects exist. These defects or problems include fraud, forged signatures on deeds, unknown heirs or previous owners, liens and documentation errors. If you were uninsured and your right to the title is challenged, you could lose significant money defending yourself – you could lose your home.
How does Title Insurance protect you?
An owner’s policy of title insurance protects a buyer against defects in the title of the property, either clearing up title problems or paying fir your losses. For a one-time premium generally paid at closing, an owner’s title insurance policy remains in effect as long as you , or your heirs, retain an interest in the property.
How does Title insurance protect the Lender?
A lender’s policy of title insurance protects the lender that financed a piece of real estate against loss caused by defects in the owners title.
Why do I need Title Insurance on a Refinance?
Title insurance on a refinanced mortgage is usually offered at a reduced rate, and it assures your lender that you actually own the property. It insures that no one else has a preemptive position in front of the leader, and if someone does, it pays the lender’s losses.
Why do I need Title Insurance on a Brand New House?
Even if your home itself hasn’t had owners, the land that it stands on has. Your policy insures you as the owner of a specific piece of property. It clarifies the property rights and insures that your builder hasn’t used it as collateral on another loan, that there are no unidentified easements affecting your property and that no problems will surface to hurt you later.
The Closing Process
How it Works
Before you understand title insurance, you need to understand what a title is. Basically, a title is a term that includes all of your legal rights to own, use and sells piece of land. The title reflects all previous ownership and transfers, including rights previously granted by other parties, such as mortgages and easements.
If there are problems with the title, the ownership of your land could be in question. Unpaid taxes, a lien (which is an unpaid claim) filed by someone who worked on the house, or any of the countless other situations could cause a major problem. And even if you don’t get the land, you might still be responsible for the mortgage! That’s why it is important to have title insurance.
1.) Know what “escrow” is, and who’s dealing with it for you
You will hear the term “escrow” quite a bit during the home buying process. So, what is escrow?
Escrow (or “settlement service”) describes the process of a third party holding money or property in trust for another until certain conditions are met. An example is any amount given to your real estate agent to accompany your offer on a house. That money goes into an escrow account until you close. Likewise, the settlement agent holds your down payment and your lender’s loan proceeds in escrow until closing.
You also might keep money in escrow with you mortgage company for as long as you’re paying for your house, so the mortgage company can pay your homeowners insurance and real estate taxes for you.
2.) Know what is meant by “closing”
Closing (or “settlement”) is the point where all the title research is completed, the mortgage loan is approved, and all the paperwork is ready to be signed an recorded. Once all of the documents have been signed, the funds disbursed anfd the deed an mortgage recorded, the transaction has “closed”. In most cases, after closing, the house is all yours.
3.) You Choose your title insurance company
When it comes to title insurance, you have the right to choose whatever company you’d like. Although many people just rely on their attorney, mortgage lender or real estate agent to pick a title insurance company for them, ultimately the decision is yours
4.) Title Insurance is a one-time cost
You don’t pay monthly or annual premiums to keep your title insurance – you pay it just one time, typically at closing. Then you’re covered for as long as you own the home.
Title Problems
Examples of the Title Problems
This list shows why it’s important to own title insurance. Although a thorough examination should identify all the title problems reflected in public records, not all of these problems are apparent in public records. Any of the title problems listed here can make your title worthless (and yes, these things DO happen) – but an owner’s title policy prtects you from financial losses canned by title issues
Hidden Title Problems:
- Someone has presented themself as the true owner of the land, but is actually not
- There are forged title documents
- There are people who claim to have “power of attorney” who don’t have the legal authority to act for another person
- There are deeds delivered after the death of one of the people involved. Without the prewritten consent of the deceased.
- It is discovered that a will isn’t legally valid
- A deed is to, or form,a defunct corporation
- There are heirs missing or not disclosed in title documentation
- Wills were misinterpreted
- Deeds were made by people of unsound mind
- Deeds were made by minors
- Deeds were made by non-citizens
- Erroneous reports were furnished by tax officials
- Estaes were with key people absent
- There is an undisclosed divorce of a spouse who claims to be an heir
- There is a spouse who is supposedly, but not legally, divorced from someone involved in the proceedings
- Children were born or adopted after the date of a will that involved the property
- Surviving children were omitted from a will that involved the property
- Mistakes were made in recording legal documents
- Title records were falsified
- Creditors make claim against a property that was sold by heirs or other people named in a will
- Deeds were made under duress as a last option to foreclosure
- Easements (limited rigths for other parties to use the land) exist that were not located by a survey
- A deed incorrectly identifies public property as private property
- There are errors in tax records
- There are deeds from a bigamous couple
- Representatives on legal documents (eg, Notary Seals) are invalid or incorrect
- The property was condemned but there is no official record of the condemnation