What is title insurance?
A title insurance policy is a contract of indemnity that imposes a duty on the insurance company to indemnify the insured against losses caused by defects in title. The alleged defect must involve a flaw in ownership rights of the property to trigger coverage.
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 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 does the seller need to provide title insurance?
Any purchaser will need evidence that the 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 the 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 ensures 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.
What does title insurance protect from?
Forged deeds, mortgages, wills, releases and other documents
False impersonation of the true landowner
Deeds by minors
Documents executed by a revoked or expired Power of Attorney
False affidavits of death or heirship
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
Defective acknowledgments 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 the difference between a title commitment and a title policy?
After we complete our research, the title company provides all parties involved in the transaction a title commitment. At this point, the title company is providing everyone with the information that the company is willing to insure. It includes pertinent information about the legal land description, people in title and the amounts that we are willing to insure, this is on Schedule A. On Schedule B, the title company will put any document that was filed of record in the courthouse related to this property. This will include, but is not limited to, items like covenants and restrictions, leases, easements and right of ways. Schedule C will be the items that the parties will have to attend to in order for the closing to proceed and the title to be able to insure.
The title policy is the document that is produced after the closing has occurred. This is your actual policy if you ever have a claim.
Do I have to have a new survey to buy/sell a home?
No, not necessarily. Surveys can be used in a transaction if the title company and the mortgage company approve them. If there are significant changes to the property since the last survey, you will likely be required to get a new survey. Sellers will be required to sign a T-47 affidavit to attest that no changes have been made to the property. Buyers should always be 100% comfortable with the survey before closing.
What is on Schedule B of my commitment?
Schedule B will reflect any documents filed of record in the courthouse that affect the property being insured for the transaction. These items are for the buyer's information and in many cases cannot be removed. If there is something on Schedule B that the buyer is concerned about, they will need to have an attorney review.
Why can't I change how I receive my proceeds from a closing?
Cyber Fraud is an issue in our industry and in order to protect all parties from fraud, the safest measure is to make sure that no last-minute changes to the transfer of funds are authorized. For this same reason, we have disclaimers on our emails that we will never change our wire instructions in a transaction. Please call your title company immediately if you get any change to wiring instructions.
Who orders the Survey?
Per the sales contract, the party paying for the survey is responsible for ordering the survey. Regardless of whether or not the transaction closes, the survey company and any other vendor that has completed work will require payment for their services. If the transaction cancels, we can not release earnest money until all vendors that we have received invoices for up to that point have been paid. Buyers and sellers need to pay close attention to who is paying for any services that will be executed during the process.
Why does my Deed have that I paid “$10.00” in it?
“for and in consideration of the sum of Ten and No/100 ($10.00) Dollars cash and other good and valuable consideration”
Consideration is a legal term used to describe the value that changes hands as part of an agreement between two or more parties. Most deeds contain the citation “for and in consideration of the sum of Ten and No/100 ($10.00) Dollars cash and other good and valuable consideration”. This keeps the actual consideration, the sales price, private.
Do I have to pay for it every year?
Since title insurance covers what has happened on the property in the past and does not cover any future liens or legal agreements that affect the property, it is a one time cost.