Owning real estate is one of the most precious values of freedom in this country. You want the assurance that the property you are buying will be yours. Other than your mortgage holder, no one else should have any claims or restrictions against your home.
Title insurance is issued after a careful examination of the public records. But even the most thorough search cannot absolutely assure that no title faults are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search. Title insurance eliminates any risks and losses caused by faults in title from an event that occurred before you owned the property.
Title insurance is different from other types of insurance in that it protects you, the insured, from a loss that may occur from matters or faults from the past. Other types of insurance such as auto, life, or health cover you against losses that may occur in the future. Title insurance does not protect against any future faults, but does protect you from risks or undiscovered interests. Another difference is that you pay a one-time premium for a policy that remains effective until the property is sold to a new owner - even if that doesn't occur for decades.
What can make a title defective?
Several problems could remain undisclosed, even after the most extensive search of the public records. These hidden defects are dangerous, because it could be months or years before they become known. Yet the owner could be forced to pay large sums of money to defend these claims. When you purchase a title insurance policy, you receive protection from these and a host of other hidden defects.
· Forged deeds
· Mistakes in recording of documents
· Creditor claims
· Undisclosed heirs
· Incorrect legal descriptions
· Errors in tax records
· Incorrect or misrepresented marital status
· Undisclosed heirs
· Forged deeds, mortgages, wills, releases and other documents
· False impersonation of the true land owner
· Deeds by minors
· Documents executed by a revoked or expired Power of Attorney
· False affidavits of death or heirship
· Probate matters
· Deeds and wills by persons of unsound mind
· Conveyances by undisclosed divorced spouses
· Rights of divorced parties
· Deeds by persons falsely representing their marital status
· Adverse possession
· Defective acknowledgements due to improper or expired notarization
· Forfeitures of real property due to criminal acts
· Mistakes and omissions resulting in improper abstracting
· Errors in tax records
What is title insurance?
Insurance which protects the lender and the homeowner against loss resulting from any defects in the title or claims against a property that was not uncovered in the title search.
What is a title?
A title is the evidence of right that a person has to the ownership and possession of land. It is possible that someone other than the owner has a legal right to the property. If that right can be established, this person can claim the property outright or make demands on the owner as to its use.
What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the sellers' right to transfer ownership, and to discover any claims, defects, or other rights or burdens on the property.
What problems can a title search reveal?
A title search can reveal several types of defects and liens, as well as other encumbrances and restrictions. These include unpaid property taxes, unsatisfied mortgages,, judgments against the seller and restrictions limiting the use of the property.
What does title insurance cost?
A lot less than you probably think. Fees vary per different sections of the country, but generally the cost of title insurance, including search, exam and related services, amounts to about one percent or less of the cost of the property.
What is a closing?
Closing, which is also known as settlement or escrow, is the event where the title to the property is transferred from seller to buyer. Closing is typically held in an office, such as that of the title company or attorney, and involves the completion of all the forms or paperwork to finalize the agreement between seller and buyer. Also, all financial issues are settled at closing. Once the title is successfully transferred, the necessary documents are prepared, signed and filed with the local authorities.
What is a Lender's Policy?
A lender's policy, also known as a loan policy or a mortgage policy, protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters which may exist, but may not be known at the time of the sale.
This policy only protects the lender's interest. It does not protect the purchaser. That is why a real estate purchaser needs an owner's policy.
What is an owner's policy?
An owner's policy protects you, the purchaser, against a loss that may occur from a fault in the ownership or interest you have in the property. You should protect the equity in your new home with a title policy.
What does an owner's policy provide?
Protection from financial loss due to demands that may be charged against the title to your home, up to the cost of the title policy.
Payment of legal costs if the title insurer has to defend your title against a covered claim.
Payment of successful claims against the title to your home covered by the policy, up to the cost of the policy.
Why the seller needs to provide title insurance?
Any purchaser will need evidence that his investment in your property is free of title defects. The title insurance policy that you provide the purchaser is a guarantee that you are selling a clear title to your real estate, unencumbered by any legal attachments that might limit or jeopardize ownership. It will reassure your purchaser that he or she is protected from any risks or losses and could help you close your deal.
Why the buyer needs title insurance?
Without title insurance, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records, or mistakes in examination of the title. As a result, you may be held fully accountable for any prior liens, judgments or claims brought against your new property. If this should occur, your title policy insures that you will be defended at no cost against all covered claims up to the amount of the policy.
How much does title insurance cost?
The insurance commission approves and controls the premiums for title insurance policies. The premiums are paid only once and the cost depends upon the purchase price of the property and the policy amount must be equal to the purchase price.
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