Frequently Asked Questions About Title Insurance
We at Probe have compiled some frequently asked questions about Title Insurance and their answers for your reference. Be sure to contact us for further or more detailed information.
What is a title?
A title is the foundation of property ownership. It is the owner's right
to possess and use the property.
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 has 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 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 kinds 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.
Are there any problems that 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 and clerical errors in the records. These defects can
arise after you've purchased your home and can jeopardize your right to
ownership.
What is title insurance?
Title insurance is your policy of protection against loss if any of these
problems - even a "hidden hazard" - results in a claim against
your ownership.
How much could I lose if a claim is filed against my property?
That depends on the claim. In an extreme case, you could lose your entire
home and property - and still be liable to pay off the balance of your
mortgage. Most claims aren't that dramatic, but even the smallest claim
can cost you time, money and aggravation, and you may have to pay costs
for a legal defense.
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 of 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.
The owner of the property has a deed. Isn't that proof of ownership?
Not necessarily. A deed is just a document by which the right of ownership
in land is transferred, whatever that right may be. It's not proof of
ownership, and it doesn't do away with rights others may have in the property.
In addition, a deed won't show you liens or claims that may be outstanding
against the title.
Wouldn't an abstract show property limitations and restrictions?
Maybe - and maybe not. An abstract is a history of the property title
as revealed by the public records. Abstracts may contain errors and do
not disclose "hidden hazards" that can threaten your property
title if you do not have a title insurance policy.
What about an attorney's opinion?
An attorney's opinion is based on a search of the public records. So,
once again, even the most exhaustive search of these records may not reveal
everything. Unlike a title insurance company, an attorney is not liable
if you should suffer loss because of "hidden hazards" in the
title.
The owner of the property I want to purchase has lived in the
home for only six months. He had a title search done six months ago. Why
do I need another one?
Because the owner could, in a very short time, do many things to encumber
the title. For example, he could grant easements or construct improvements
that encroach on adjacent property. It is necessary to conduct an up-to-date
title search to uncover any such problems.
If the builder of my home 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 different types of title insurance policies?
Yes. Basically there are two different types of policies - a loan policy
and an owner's policy. The loan policy protects the lender's interest
in the property as security for the outstanding balance under the buyer's
investment or equity in the property up to the face amount of the policy.
(Title insurers in many states offer increased policy coverage through
inflation endorsements to cover increases in value due to inflation.)
How much does title insurance cost?
Probably a lot less than you think. Charges vary in different sections
of the country, but generally the cost of title insurance (including search,
examination and related services) amounts to about one percent or less
of the cost of the property. And unlike other insurance premiums, which
must be paid annually, a title insurance premium is paid one time only,
usually at settlement.
How long does my coverage last?
For as long as you or your heirs retain an interest in the property and,
in some cases, even beyond.
Where can I get title insurance?
From any licensed title insurance company or its representatives operating
in your state. When choosing a title insurer, it is important that you
look for a company with expertise and experience, as well as the financial
strength to protect you should a claim arise. Your broker or attorney
can recommend such a company.