Frequently Asked Questions
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What is title insurance?
It is an insurance policy that protects the insured against loss should the condition of title to the land be other than as insured. Unlike other types of insurance that offer protection against future occurrences, title insurance protects against past occurrences that could result in a claim at a future date. Title insurance provides the insured with “peace of mind” knowing you are receiving good and marketable title to the real estate you purchase.
Why do I need title insurance?
When you buy any property, you expect certain rights from ownership. Title insurance covers those rights, such as:
- To be able to occupy and use the property as you wish
- To be free from debts or obligations not created or agreed to by you
- To freely sell or pledge your property as security for a loan
- And more.
Suppose there is an error in public records or defects are hidden or not disclosed by public records. In that case, your owner’s title policy ensures your defense, free of charge, against all covered claims and pays up to the amount of the policy to settle valid claims.
What is a title search?
A title search is a thorough review or examination of the public records that pertain to real property ownership and the rights/limitations of its use. The search period begins with the current owner(s) and extends back in time for 60 years (commonly referred to as the “chain of title”). All documents affecting the subject property are reviewed for accuracy, completeness and proper execution.
Similarly, all owners of record during the search period are indexed to determine their ownership interests, marital status, and legal and mental capacity to enter into a contract to sell/buy real property. All conveyances must have been properly conducted and approved by the appropriate governmental departments.
What issues can a title search reveal?
A title search can show any title defects, liens, and other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against buyers/sellers, and any restrictions or conditions limiting land use.
Are there any issues a title search may NOT reveal?
Yes. There are some “hidden hazards” that even the most diligent title search may not reveal. For instance, a previous owner could have incorrectly stated his marital status resulting in a possible claim by his legal spouse. Other hidden hazards include fraud, forgery, defective deeds, mental incompetence, confusion due to similar or identical names, and clerical errors in the City/County land records.
What is a HUD-1 Settlement Statement?
This is a summary of the financial portion of a real estate transaction. The statement will list the purchase price, loan amount, closing costs for the buyer and seller. It will show all sums being charged and disbursed to the parties involved. It also clearly summarizes the total amount due from the purchaser.
The Department of Housing & Urban Development requires the title company or closing agent to use the HUD-1 on virtually all one-family to four-family residential real estate transactions involving a lender.
What does title insurance cost?
The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property.
Does my title insurance coverage continue past death or if I sell?
If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property.
If I have a problem, will I lose my property to make a claim?
Not at all. At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. Title insurance includes coverage for legal expenses that may be necessary to investigate, litigate, or settle an adverse claim.
If my lender obtains title insurance, why do I need it?
The lender’s policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender’s ability to foreclose and recover its principal and interest.
In the event of a claim, there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner’s policy is a bargain.