Frequently
Asked Questions
What is title?
A title is the foundation of property ownership. It is the owner's
right to possess and use the property.
If a builder of my house 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.
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.
I
thought my loan policy would protect me?
The loan policy protects the lender against loss due to unknown
title defects. It also protects the lender's interest from certain matters that may exist but may not be known at the
time of sale.
This policy only protects the lender's interest. It does not protect you. That's why you
need an owner's policy, which can be issued at the same time as the loan policy for a nominal one-time fee.
What is title insurance and whom does it protect?
Most people are unaware that most real estate is encumbered
to some extent and a significant amount of real estate is subject to title defects of varying degrees. Sometimes buyers of
real property are persuaded to disregard obtaining a title insurance policy as an unnecessary expense of the cost of the transaction.
On other occasions, buyers are referred to title agencies, which are unfamiliar to them, and who write insurance policies
on companies (underwriters) whose financial stability may be unknown or in question. Such advice and action could turn out
to be foolish, very risky and costly over the long-term.
Title insurance protects you against loss of the inherent
value of the property (what the property can be used for) and is a means of financially protecting yourself during periods
of ownership and subsequent to ownership against claims which may:
(1) divest you of your interest in your property;
or
(2) subject you to lawsuits under your warranty deed after your property has been sold.
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 seller's right to transfer ownership, and to discover any claims, defects and other rights or burdens
on the property.
What kind 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.
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 as 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 are the costs for title insurance?
The cost is directly related to the value of the
property. The higher the value, the more coverage is needed. The premium is small compared to the total purchase price. The
premium is paid only once and remains in force for as long as the property is owned by the insured and continues to protect
the insured on warranties after it is sold.
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 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.
What danger of loss could you face?
If a lender has title insurance protection and you don't, what possible danger of loss can you face?
For example, let's say you've bought a home for $150,000. You've made a $30,000 down payment, and your lender
holds a $120,000 mortgage lien or beneficial interest. Your lender has title insurance coverage protecting his interest up
to $120,000.
