What is A Title Search?
It’s protection against loss if a covered defect is found in your title. When you buy a home, you are given a title to the property, which generally means you receive full legal ownership. But, sometimes there’s a hidden mistake in a prior deed, will, mortgage, etc., that may give someone else a valid legal claim against your property!
Why Is Title Insurance Important?
Because it provides a “safety fence” around your property. Having title insurance can save you money, time, trouble – even your home!
Fourteen Reasons Why All Real Estate Titles Should Be Insured
- A fire destroys only the house and improvements. The ground is left. A defective title may take away not only the house but the land on which it stands. Title insurance protects the buyer against such loss.
- A deed or a mortgage in the chain of title may be a forgery.
- A deed or a mortgage may have been signed by a person under age.
- A deed or a mortgage may have been made by an insane person or one otherwise incompetent.
- A deed or a mortgage may have been made under a power of attorney after the death of the principal and would, therefore, be void.
- A deed or a mortgage may have been made by a person other than the owner, but with the same name as the owner.
- The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.
- The testator may not have revoked a will after its execution.
- A conveyance by heirs-at-law of a person supposed to have died without a valid will may be defeated by subsequent discovery and probate of a will.
- An heir or other person presumed dead may appear and recover the property or an investment therein.
- A Judgment or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding.
- Title insurance helps speed negotiations when the property is ready for resale.
- If an insured title is ever defeated, the amount of the loss is reimbursed by the title insurance company.
- Title insurance means free defense in court.
Who is Covered by Title Insurance?
The Lender – When you buy property, you are required to buy title insurance. This covers the outstanding balance on the mortgage for the lender, but does not protect you.
The Buyer – When acquiring property, it’s a good idea to get your own title insurance policy. It will give you peace of mind and maximum protection in case there’s a claim against your home. This is called an owners policy.
What Risks are Covered?
That depends on your policy. Coverage typically protects against 4 “hidden risks”.
1. Errors – incorrect information in deeds, mortgages, public records, etc., such as wrong names.
2. Leins – claims against the property or the seller that becomes the new owner’s responsibility after the sale. Examples are unpaid mortgages, taxes, sewer and water assessments, bills owed to workers or other creditors, etc. Many of these problems might not be found in a routine title search.
3. Claims to Ownership – for instance, a claim of “marital interest” by the spouse of a former owner or by a child of a former owner who was not mentioned in his or her parents’ wills.
4. Invalid Deeds – for example, transfer by a previous seller who did not actually own the property, or by a previous owner who was not mentally competent.
What Risks Are Excluded?
The following risks may not be covered by your insurance policy.
Standard Exclusions often appear as part of the printed form. For example:
- Limitations on land use, such as laws against farm animals.
- Mechanics’ leins, such as unpaid construction or repair bills.
Exceptions may also be written into your specific policy, based on defects found in the title search. For example:
- Easements, rights of way, and other legal obligations noted in the deed or in the public records.
- “Restrictive covenants”, agreements limiting certain types of use of your property.
What is A Title Search?
It is a detailed examination of the historical records concerning the property. These include deeds, civil and probate court records, tax records, etc.
What is The Purpose of a Title Search?
A title search is carried out by a lawyer, abstractor or a title insurance company in order:
1. To verify the seller’s right to transfer ownership
2. To discover any claims, errors, assessments, debts or other burdens or restrictions on the property.
What Happens at The Closing?
Ownership of the property is transferred. Title insurance in issued, and coverage begins. Depending on state and local laws, you may have to pay:
Title Costs – fees for the title search and the lender’s title insurance. Your own title insurance is an additional fee.
Settlement Fees – fees for the lender’s agent (usually a lawyer or a title or escrow company representative). You may want your own lawyer in addition.
Loan Charges – including origination, appraisal and survey fees.
Taxes and Government Fees – transfer taxes, buyer’s share of yearly property taxes.
Before you close, review the HUD-1 Settlement Statement, which provides an itemized list of all closing costs. Be sure you understand them.
How Much Does Title Insurance Cost?
You pay a one-time premium. Costs vary from state to state. Check with your lender, attorney, or title company for costs in your area. In some areas, title insurance costs are shared by buyer and seller.
If you have any questions, please do not hesitate to call us at 865-281-2120.