C161QP24004CWhat is Title Insurance?

Real estate has traditionally been a family’s most valuable asset.  It is a form of wealth that is protected by many laws.  These laws have been enacted to protect one’s ownership of real estate and the improvements located on the land.  The owner, the owner’s family, and the owner’s heirs have rights or claims in and to the property that you are buying.  Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the Internal Revenue Service or various other individuals or corporations.  The real estate may be sold to you without the knowledge of the party having a right or claim in and to the property.  In addition, you may purchase the real estate without having any knowledge of these rights or claims.  It is of the utmost importance that you receive clear title to the property when you purchase real estate.  In order to do so, you must first be informed of any existing rights or claims that may, in the future, threaten your title and possession to the property.  Title insurance provides you with this twofold protection.


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Is Title Insurance expensive?

The cost of title insurance on any piece of property is very small when compared to the benefit and security it gives. Also, there are no annual payments to keep the policy in force. The original premium is your only cost, as long as you or your heirs own the property.

Does your Deed take care of giving you clear title?

No.  A Deed is an instrument whereby a seller transfers his or her right of ownership (whatever it might be) to you. It is not proof that the person described as the seller is actually the owner. It does not eliminate claims or rights others may have in the property. The deed does not allow you to determine what rights, liens, or claims may be outstanding against your title.

My Lender has a Mortgage Title Insurance Policy on my property. Is that enough?

Any person or financial institution that lends money on real estate wants the investment protected. Mortgage title insurance assures the lender that the mortgage is a valid first lien, protected against hidden, as well as known defects, in the title as insured. Such a policy affords the only way a lender can be certain about the title which may be acquired in the event of a foreclosure. A mortgage title insurance policy protects only the lender’s interest in the property, not the current owner.

Is the record of ownership of the land complete from the first owner to current date?

You will probably buy property that over the years has had a number of different owners. The continuous record of all these transactions is called the “Chain of Title,” and like any other chain is no stronger than its weakest link. Anything wrong with, or hidden from, the title of the previous owner may very well affect your title, too.

Are there any lawsuits or claims recorded against the property itself?

If the former owner had a new bathtub installed and refused to pay the bill, the plumber may file a Mechanic’s Lien claim. This stands as a claim on the property which you, as the new owner, may have to pay in order to clear your title. Similarly, there may be suits pending affecting the property, foreclosures or bankruptcy actions, or any number of claims or legal involvements which may cloud the title until they are properly settled or removed.

How do suits or judgments filed against the owner of the property affect the title?

If a person is sued and a judgment is rendered against that person, any real estate he or she owns may become security for the debt. This means that he or she cannot sell that real estate and deliver a clear title until the judgment is paid, released, or otherwise disposed of satisfactorily. Further, other suits filed against the owner of real estate, even though not yet decided, may prevent the sale of the property.

Are all taxes and special assessments paid?

Unpaid real estate taxes are a first lien on any real property. If there has been a tax sale or forfeiture or any other objection or protest, it means that there are complications standing in the way of a clear title.

Docs anyone have special rights to the property that would limit ownership?

Many such things are possible (the right-of-way for a power line or road, an easement for a driveway, sub-surface rights), any of which may have been sold or granted to someone else by a former owner. If so, there may be restrictions on the use of your land.

What risks call for title insurance protection?

Real estate has such a great value and is so basic a form of wealth that several special laws have been enacted for its protection. As a result, the owner of land has exceedingly strong rights, and so do the family and heirs of the owner. But, others may have “rights” in the property as well. There are mortgage and leaseholder rights, liens due to unpaid taxes, lien claims to those whom the owner owes money, mining or oil rights, and many others … etc. Anyone who has such a claim is, in a limited way, a part owner. He or she cannot ordinarily be deprived of their interest except by having the claim settled or released. As a new owner you may not be aware of these risks, but you are still vulnerable to such claims on your property. That’s why a Title Insurance Policy is needed.

Is a corporation in a position to sell the property?

You may buy a piece of property in good faith from a corporation, only to have the validity of the sale challenged by a stockholder who claims it was not properly authorized by the Board of Directors, or that the company was not empowered under its charter or by-laws to sell the land at all. There are further complications possible if the company is in receivership, or if the firm is being dissolved.

What is an abstract? What doesn’t it tell about the property?

An abstract, which is used in some parts of the US, is a history of the title to the property as revealed by the public records. Included in the abstract can be deeds, mortgages, other instruments and legal proceedings which have affected the property through the years. If something is revealed in the abstract which might stand in the way of a clear title, it is up to the owner and the owner’s attorney to clear it. If this cannot be done, it must be accepted as a limitation on your right of ownership. Also, it is not infrequent for ‘matters which seriously affect the title’ to be omitted in an abstract, because they are not shown in the public records.

Will an examination of the abstract reveal all defects and hidden risks in the title?

It may not, the public records, from which an abstract is made, may not show everything that affects the title. For example: Statements in the record may be incorrect or may fail to give important facts. There may be fraudulent or improperly executed documents on the record. Facts revealed in the abstract may be interpreted incorrectly. And there may even be ordinary clerical mistakes which could seriously endanger the title. Even after all these possible hazards are eliminated, there still remain some of the most serious sources of risk, hazards which by their very nature simply cannot be uncovered. Some of the most serious risks which are not revealed by the records or by an examination of the abstract include: marital status of the owner incorrectly given, undisclosed heirs, mental incompetence or minors, fraud and forgery, defective deeds, and confusion due to similar or identical names.

Is there any way to be protected against these risks?

Yes, title insurance protects you against these risks. Under the terms of the policy, you are protected against risks and insured against loss. If your title, as insured, is ever attacked, your policy protects you in two ways:
• If it is necessary to enter into legal defense of your rights under the policy (in any suit or proceeding adversely affecting the title as insured), legal counsel employed to take such action for you is completely at the insurance company’s expense.
• If a loss is sustained, you are protected up to the full amount of your policy, which usually is equal to the full purchase price you paid for the property.

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