What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, liens, judgments, court records, property and name indexes, and many other documents. The purpose of the search is to verify a seller's right to transfer ownership, an owner's right to pledge real estate as collateral, to discover any claims, defects, or other rights or burdens on the property.
What kinds of problems can a title search reveal?
A title search can reveal a number of title defects and liens as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments, declarations, and restrictions limiting the use of the land.
Are there any problems that a title search cannot reveal?
Yes. There are some hidden hazards that even the most diligent title search may not reveal. Some examples are fraud, forgery, defective deeds, mental incompetence, and clerical errors. These defects can arise after you have purchased your home and can jeopardize your right to ownership.
What is title insurance?
When you buy a property, you want to be sure the seller has the right to sell it and that when the transaction closes, you actually own it. A title insurance policy protects property owners and lenders from losses that could result from disputes over ownership of a property's title. This could include fraud, liens against the property, or errors missed during a title search. Title insurance is important because it protects you from title hazards that could threaten the financial investment you have made in your home or other property. It also protects the lender's investment.
Are there different types of title insurance policies?
Yes. There are a number of policies, but the most common are an owner’s policy and loan policy. An owner's title insurance policy guarantees that the buyer has the right to the property. It usually covers the cost of any legal fees that arise if you have to defend your claim. The cost is based on the price of the property. A lender's title insurance policy protects the bank or other lending institution that issues your mortgage from any losses resulting from disputes over who owns the property. A policy covers the amount of the loan and the cost is based on the amount of that loan. Most lenders require this coverage, which ends when the mortgage is paid.
How much does title insurance cost?
Typically, the cost of title insurance, including the search, examination, title commitment, and endorsements, normally amounts to about one percent (1%) or less of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is a one-time fee, usually due at settlement.
Who pays for title insurance?
The buyer pays this expense.
Why do I have to buy a title insurance policy on behalf of my lender?
Anytime a customer gets a real estate loan from a financial institution the customer is required to purchase a Mortgagee's title insurance policy for the benefit of the lender. This insurance is purchased to protect the lender's investment against any clouds on the title.
Does the loan policy protect the borrower?
No. The loan policy only protects the lender against loss due to unknown title defects. It does not protect the borrower. That is why a real estate purchaser needs an owner's policy, which can be issued at the same time as the loan policy, usually for a nominal one-time fee.
Do I need a new Owner’s policy when I refinance?
No. A new owner's policy is not required when refinancing. If a new appraisal is performed and the property is worth more than it was when the owner's policy was issued, your current owner's policy can be updated. The new owner's policy can be issued for the current fair market value of the property and you only pay the difference in premium costs for the increase in coverage.
What’s covered by title insurance?
- Fraud associated with the title ownership
- Liens existing against the property at the time the policy was issued
- Mistakes in the public record that are not caught before the sale
- Inaccurate or conflicting wills and trusts related to the title
- Undisclosed or missing heirs who claim to own the property
- Forged or misfiled deeds and other documentsInstruments executed under invalid or expired power of attorney
- Mistakes in legal descriptions, deeds by persons of unsound mind or minors
- Deeds by persons supposedly single, but in fact married
- Errors or flaws in the title that are not discovered during the initial title examination
How long does title insurance coverage last?
Under an owner's policy, for as long as you or your heirs retain an interest in the property and, in some cases, even beyond. Under a loan policy, until the loan is paid in full.