Title insurance
Title insurance
involves a one-time premium that buys a policy to safeguard your
property should such difficulties arise. It protects the buyer
from claims on his land, and provides the peace of mind and a
legal guarantee that once you have purchased it, it is yours, or
the title company must pay you for damages.
It's called a
"Marketable Title", proof that your property is free and clear of
prior indebtedness or other defects or encumbrances. It is the
most critical part of the home buying process that you walk away
with a marketable title. Unfortunately, the process is a little
more complicated than it may seem.
You should never
accept a deed, the transfer document the seller warrants your
title against claims of other persons, without a thorough title
examination of the property. This involves its complete legal
history.
In some cases, more
today than ever, the process uncovers title defects that could put
your ability to take a clear title in jeopardy.
If research reveals
title defects, you can compel the seller to undertake legal
proceedings to clear it. This includes hidden flaws that may
escape the examination and put your ownership in question, even
after you've closed.
Examples of title
defects include:
-
Lost or forged deeds
-
A married signer who
represents himself/herself as single
-
Claims of undisclosed
heirs
-
Impersonation of
another
-
Clerical error at the
courthouse when earlier documents were recorded
-
Incorrect legal
description
-
Instruments signed by
minors or mentally incompetent persons
-
Title taken as a
result of an improperly probated will
-
Confusion of title
resulting from similar names
That's why title
insurance isn't really an option. It's your only protection from
these defects. If you're forced to defend your title in court, the
insurer agrees to pay the costs.
Your lender will
insist on title insurance in the amount of the mortgage loan.
Unfortunately, a lender's policy or mortgagee policy doesn't
protect your ownership interest. You need an owner's policy.
The owner's title
insurance policy is an agreement that the insurer will pay all
losses involved in any claim covered by the policy terms.
The owner's
policy provides two types of coverage:
-
If the insured title
is contested, the insurer will defend the title at no expense to
you.
-
If the title is
defective and the problem cannot be resolved, title insurance
protects you from financial loss. You'll be reimbursed up to the
amount of the policy -- generally, the full amount of your loss.
The fee is modest, a
one-time premium that continues, in effect, forever, even after
you sell your home. The policy is issued in an amount equal to the
purchase price of the property or its market value.
Many companies sell
title insurance. They only prepare documents
for closing and issue your title insurance policy. The title
agency cannot represent your legal interests and cannot give you
legal advice.
An
attorney representing your interests
An attorney
representing your interests is the most reassuring way to conduct
a thorough title examination and issue an owner's policy.
It's very likely the
single largest purchase you'll ever make. You should have someone
there who will represent your interests. Exclusively.
That's why we
recommend you have a real estate attorney there throughout the
entire process, ideally before a contract is prepared. He or she
can explain the things essential to your purchase, such as:
-
Your liability if
assuming an existing mortgage
-
The effect of any
existing mortgage and construction liens
-
Alternative means of
financing, including the effect of mortgage pre-payments
-
Where and how to file
for homestead exemption
-
The seller's liability
after the sale
-
Post-contract
liability for fire and other hazards
And he or she
will ensure the following is executed:
-
Obtain a title search,
evaluate the status of the title, and require appropriate legal
remedies to clear defects
-
Prepare or review the
Closing Statement and other closing documents and inform you of
stipulations that affect your interests
-
Prepare a bill of sale
to cover any personal property such as drapes and appliances that
are included in the sale
-
Advise you how title
should be taken and how this affects your overall business and
personal estate
-
As required,
investigate zoning ordinances and other governmental use
restrictions
-
Relate the income,
estate, and gift tax consequences to your estate
-
Check unrecorded
municipal liens, including sewer and special assessment liens
-
Advise on what the
title policy does not protect against, with emphasis on
insurability and marketability
The final stage of the
process is the closing. It is here that your attorney will make
sure the documents carry out the parties' actual intent as
originally expressed in the contract, and meet requirements for a
marketable title. Although the hiring of an attorney is not a
mandatory step in the closing process, we recommend that you seek
the advice of a local real estate attorney.
Dependable
