Frequently Asked Questions
Why is transferring the title to real estate different from transferring the title to other items, such as a car?
Because land is permanent and can have many owners over the years, various rights in land (such as mineral, air or utility rights) may have been acquired by others by the time you come into possession of it, even if the land has never before been built upon. So in order to transfer a clear title to a piece of land, it is first necessary to determine whether any rights are outstanding.
What kinds of problems can a title search reveal?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Are there any problems a title search cannot reveal?
Yes. There are some “hidden hazards” that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other “hidden hazards” include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you have purchased your home and can jeopardize your right to ownership.
How can there be a title defect if the title has been searched and a loan policy issued?
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards 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.
Why do you need title insurance?
To protect possibly the most important investment you will ever make – the investment in real estate.
A lender goes to great lengths to minimize the risk of lending money for the purchase of real estate. First, credit is checked as an indication of the borrower’s ability to repay the loan.
Then the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.
How much does title insurance cost?
Click here to view the current title insurance premium rate chart.
Does the Loan Policy protect the borrower?
No. The loan 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. That is why a real estate purchaser needs an owner’s policy, which can be issued at the same time as the
loan policy, for a nominal one-time fee.
What is the danger of loss?
If the lender has title insurance protection and the owner does not, what possible danger of loss exists?
As an example, assume real estate was purchased for $100,000. A down payment of $20,000 is made, and a lender holds an $80,000 mortgage lien, or beneficial interest. The lender acquires title insurance protecting the lender’s interest up to $80,000. But the purchaser’s down payment of $20,000 is not covered.
What if some matter arises affecting the past ownership of the property?
The title insurance company would defend and protect the interest of the lender. The purchaser, however, would have to assume the financial burden of his or her own legal defense. If the defense is not successful, the result could be a total loss of title.
The title insurance company pays the lender’s loss and is entitled to take an assignment of the borrower’s debt. The purchaser loses the down payment, other equity in the property that may have accumulated, and the property. And the balance on the note is still due!
What does title insurance protect against?
Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:
– False impersonation of the true owner of the property
– Forged deeds, releases or wills
– Undisclosed or missing heirs
– Instruments executed under invalid or expired power of attorney
– Mistakes in recording legal documents
– Misinterpretations of wills
– Deeds by persons of unsound mind
– Deeds by minors
– Deeds by persons supposedly single, but in fact married
– Liens for unpaid estate, inheritance, income or gift taxes
– Fraud
What protection does title insurance provide against defects and hidden risks?
Title insurance will pay for defending against any lawsuit attacking the title as insured, and will either clear up title problems or pay the insured’s losses. For a one-time premium, an owner’s title insurance policy remains in effect as long as the insured, or the insured’s heirs, retain an interest in the
property, or have any obligations under a warranty in any conveyance of it. Owner’s title insurance, issued simultaneously with a loan policy, is the best title insurance value a property owner can get.
How does title insurance protect my investment if a claim should
arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense – and pay all court costs and related fees. also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
The owner of the property has a deed. Isn’t that proof of ownership?
Not necessarily. A deed is just a document by which the right of ownership in land is transferred, whatever that right may be. It is not proof of ownership, and it doesn’t do away with rights others may have in the property. In addition, a deed will not show you liens or claims that may be outstanding against the title.
Wouldn’t an abstract show property limitations and restrictions?
Maybe – and maybe not. An abstract is a history of the property title as revealed by the public records. Abstracts may contain errors and do not disclose “hidden hazards” that can threaten your property title if you do not have a title insurance policy.
How long does my coverage last?
For as long as you or your heirs retain an interest in the property and, in some cases, even beyond.
If the builder of my home already has title insurance on the property, why do I need it again when I purchase the land from him?
A title policy insuring the builder does not protect you. Also, a great many things could have happened to the land since the builder’s policy was issued. Liens, judgments, and unpaid taxes for which prior owners were responsible may be disclosed after you purchase the property – causing you aggravation and costing you money.