Title insurance is a policy that brings peace of mind to a property owner. It lets the homeowner know that the property you think you own is indeed yours. The title company did a search through years of public records tracing the chain of ownership through many previous owners.
Title Research
The largest investment a consumer makes is the purchase of a place to live. It is a complex financial transaction involving many parties: seller, buyer, lender, surveyor, lawyer, researchers and a host of clerical staff. Each party has a unique and separate interest to satisfy within the total transaction.
The lender controls most of the paperwork and one of the items they insist upon is title insurance. This will protect their interest in the property they are financing. A soon-to-be homeowner will mistakenly perceive that the lender’s title insurance also protects the homeowner’s interest in the same property.
There is another, more comprehensive, policy designed to protect the new owner. It gives coverage up to the purchase price of the property and guarantees payment of any valid claim against the title. The title company pays all attorney and court costs in connection with the defense for as long as the buyer retains ownership of the property.
Potential Problems
A variety of factors can affect the seller’s title. Among the difficulties that could be lurking in the shadows are the following items:
• Public records may include a property description that, unknowingly, contain inaccuracies
• Legal action pending against the property at the exact time the search is in progress
• Old mortgages that are still on the books – never discharged
• Unpaid back taxes
• Forgeries appearing on older documents (deeds, mortgage releases, etc.)
• Misinterpretations of wills from previous owners
• Claims by previous unknown heirs
• Deeds by minors or mentally unstable persons
• Estates under administration for absent owners who are alive
• Real estate sold by heirs still owing to creditors
• Active easements or unpaid betterments
• Ownership of underground or air rights by parties unknown
Purchasing Owner Title Insurance
Attorney liability has a payment limit of negligence – not responsibility – for title problems and that liability is equal only to the amount the lawyer is able to pay. The cost of defense against a claim and loss of title become could become the total responsibility of the property buyer.
It is every buyer’s expectation that a property purchase will render a clear title for this new owner. This is the reason why Owner’s Title Insurance is the second type of title insurance that a new owner should purchase for extended protection. Buy this even if your closing attorney conducts a title examination.
Title Insurance Cost
Payment of a one-time premium occurs at closing and is part of the settlement costs. This is not a recurring payment like the homeowner’s casualty insurance. The cost of title insurance ranges from $3.50 per $1,000 for the owner and $2.50 per $1,000 for the lender. This is an estimate from the records of the title insurance industry.
The actual cost of title insurance is subject to what the local marketplace will bear. As a result, actual prices will vary and are dependent upon research time, associated costs and property location. In some locations, the line item for title insurance may present a figure that includes a title search, examination of previous searches.
Conclusion
You should buy owner’s title insurance at the same time you purchase the property. There are both inclusions and exclusions within the policy and the exclusions are red flags for title problems. Insist upon reading the policy before closing date to note the exclusions and request a remedy or abandon the transaction.
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