Title Insurance
What is Title Insurance?
Title insurance is an exclusively American invention. Its purpose was well stated in the first advertisement for title insurance back in the late 1800s:
“This company insures the purchasers of real estate and mortgages against loss from defective titles, liens, and encumbrances. Through these facilities [the] transfer of real estate and real estate securities can be made more speedily and with greater security than heretobefore.” [circa 1876]
Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.
Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is risk assumption through the pooling of risks for losses arising out of unforeseen future events (such as death or accidents), the primary purpose of title insurance is to eliminate risks and prevent losses caused by defects in title arising out of events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is excepted from coverage.
Why Do You Need It?
Buying a new home is one of life’s most gratifying experiences. As you approach the big day of closing, however, all the details can be a little overwhelming. You might easily overlook the single most important step in the entire process — the purchase of Title Insurance on the wonderful new home of yours.
What is a Title?
A title is the evidence, of right, that a person has to the ownership and possession of land. It is possible that someone other than the owner has a legal right to the property. If that right can be established, this person can claim the property outright or make demands on the owner as to its use.
Do I need Title Insurance?
Most definitely! Title insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.
What can make a Title Defective?
Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These hidden “defects” are dangerous indeed because you may not learn of them for many months or years. Yet they could force you to spend substantial sums on a legal defense, and still result in the loss of your property.
But the lender already requires Title Insurance, won’t that protect me?
Not necessarily. There are two types of Title Insurance. Your lender likely will require that you purchase a Lender’s Policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it.
An Owner’s Policy on the other hand is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner’s title policy covers the full cost of any legal defense of your title.
How much does Title Insurance cost?
The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you or your heirs own the property.
When should I look into purchasing Title Insurance?
Call Old Republic Title as soon as you and the seller sign the earnest money contract. With a brief summary of the details, our team of title experts will begin a search of the public records and issue a title commitment. Because there are a number of steps we must take to make certain that we know all we can about the title, it is wise to get the ball rolling as soon as possible.
Should I shop around for the best Title Insurance deal?
Some states closely regulate rates. Others permit open competition, often resulting in significant differences between title insurers on rates and coverage. Depending where you live, it pays to investigate your options carefully in order to obtain the most complete coverage.
What items are needed at closing?
You will want to have these items complete or in hand when you come to the closing (please confirm with your escrow officer, as practices vary by state):
Buyer
Buyer’s copy of purchase agreement
Cashier’s check(s) to make all payments
Proof of purchase of insurance for fire, casualty, etc.
Photo identification (passport, driver’s license, or state-issued identification card)
Seller
Seller’s copy of purchase agreement
Invoices for any unpaid taxes, utilities, assessments, and latest utilities meter readings
Any unrecorded instruments that affect the title
Proof of satisfaction of any mechanics’ liens, chattel mortgages, judgments, or mortgages that were paid prior to the closing
Photo identification (passport, driver’s license, or state-issued identification card)
Benefits of Title Insurance
Title insurance issued by Old Republic Title provides a broad range of benefits to the parties involved in a real estate transaction.
To the Purchaser of Real Estate…
The purchaser of real estate needs protection against serious financial loss due to a defect in the title to the property purchased. For a single, one-time premium, which is a modest amount in relationship to the value of the property, a buyer can receive the protection of a title insurance policy – a policy that is backed by the reserves and solvency of the Company. A title insurance policy will cover both claims arising out of title problems that could have been discovered in the public records, and those so-called “non-record” defects that could not be discovered in the record, even with the most complete search.
A title insurance policy will not only protect the insured owner, but also that person’s heirs for as long as they hold title to the property, and even after they sell by warranty deed. The Company will not only satisfy any valid claim made against the insured’s title, but it will pay for the costs and legal expenses of defending against a title claim.
To the Lender…
The overwhelming majority of mortgage loans made in the United States are made by persons who are acting in a fiduciary capacity – by savings and loan associations, savings banks, and commercial banks on behalf of their depositors, and by life insurance companies on behalf of their policyholders. Because they are lending other people’s money (other people’s savings or policyholder’s funds) these lenders must be concerned with the safety of their mortgage investments.
A policy of title insurance provides a mortgage lender with a high degree of safety against the loss of security as a result of a title problem. This protection remains in effect for as long as the mortgage remains unsatisfied.
Old Republic Title also provides lenders with in-depth expertise on a wide variety of title related matters to facilitate the mortgage loan process.
To the Seller…
An owner of real property whose interest is insured by an owner’s title insurance policy has the assurance that the title will be marketable when selling the property. The title insurance policy protects the seller from financial damage if the seller’s title is rejected by a prospective purchaser. Also, when the seller conveys with “warranties,” the seller is still protected if the buyer sues because of a breach of those warranties.
To the Real Estate Attorney…
Title insurance enables the real estate attorney to provide the client with substantially greater protection than would be afforded by the attorney’s opinion alone. The attorney’s opinion is generally limited to recorded matters and the client can only recover from the attorney if the attorney is found to be negligent. (Remember the case of Watson v. Muirhead that prompted the creation of title insurance?)
To the Real Estate Broker…
The title insurance company and the real estate agent both seek to ensure that as many purchases as possible are closed to the satisfaction of all the principals in the transaction. From the broker’s standpoint, the efficient and safe transfer of title will result in client satisfaction, increased prestige, and continued business.
Apart from the security that title insurance offers, most brokers have experienced numerous instances in which title insurance personnel have enabled them to close transactions that otherwise would have been delayed. By helping to avoid delays, Old Republic Title is able to facilitate the job of the real estate broker and to minimize the inconveniences and costs to the homebuyer.
To the Home Builder…
By providing various title insurance services and information to the home builder, the title insurance industry can and does assist the builder in identifying and evaluating building and use restrictions, easements, etc., in removing title problems that may arise, and in facilitating prompt and needed disbursement of construction funds from the construction lender. All of these services ultimately rebound to the benefit of the buyers of newly constructed homes.
To the Community In General…
Apart from the unique benefits title insurance offers to particular parties interested in a real estate transaction, title insurance companies can and do offer considerable assistance to public officials through the use of their “title plants” – the data banks of reorganized and indexed public records that are maintained by the Company in many areas of the country.
Much of the information contained in title plants is not readily available from other sources. This fund of information about the date of recent sales, representative sale prices, ownerships, area maps, use restrictions, surrounding properties, and a host of other matters pertinent to proposed projects, has helped representatives from all levels of government save countless hours and taxpayer dollars. In addition, title plant people frequently help recording officers correct errors they discover in public indices and records.
