Title Insurance FAQ

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. There are two types of policies; an owner’s policy and a lender’s policy. If a problem is discovered with the title of the property, this insurance protects the parties involved from financial loss.

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.)

An owner’s policy is one that protects the individual purchasing the property, who is going to become the owner. In the event that there is an issue with the title or an issue that affects the value of the property, the purchaser is covered under this type of policy.

The lender’s policy protects the financial institution providing the mortgage in the event that an issue occurs with the title of the property.

Each types of policies protect against the same issues, but for different parties involved. It is advisable that both an owner’s policy and lender’s policy are obtained during the purchasing process.

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.

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.

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.

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.

The Closing Agent is responsible for managing the closing, disburses all funds, ensuring that all documents are properly prepared, and coordinating the signing of all documents relating to the transaction. The Closing Agent is a neutral party, working not for the buyer, seller, real estate agent, or lender directly. They are liable for handling the activities for each person involved in the transaction equally and without bias.

As part of the Closing Agent’s responsibility, he or she will coordinate the pre-closing procedures and serve as a focal point for the transaction. The Closing Agent will first search and examine public records to determine the details of the property being bought and sold. They will also review all documents related to the transaction, including deeds, mortgages, liens, etc.

After this first step is complete, the Closing Agent will prepare the document called a Title Commitment. This document discloses all information about the title, including any defects, current owner, and anything that must be excluded from coverage. This document confirms that all requirements have been met to obtain a title insurance policy, which is typically issued within 45-60 days of closing.

Depending on location of the property, the Closing Agent will likely order a Boundary Survey and Elevation Certificate, if applicable. A Survey is required on all transaction where a Lender is involved. Experts recommend obtaining a survey for all transactions whether or not they are required. A Survey is a sketch of the boundary lines of the property, which also shows any structures on the property such as power lines, sheds, fences, etc. The Elevation Certificate reflects the flood zone and elevation of the property. An Elevation Certificate is required for the homeowner to obtain flood insurance.

As the coordinator of the transaction, the Closing Agent will confirm the time and date of the closing. During transactions where financing is involved, the loan package and closing instructions are a required prior to preparing the HUD-1. This documentation is usually provided 24-48 hours prior to the scheduled closing date. However, in today’s market, receiving the loan package and closing instructions on the day of closing is not uncommon. The real estate agent will be present to support their client, but is typically not very involved in this step of the process.

The Closing Agent will conduct the closing, explain all documents to the buyer and seller, and notarize the documents. During this roughly 30 minute process, the seller’s documents are also signed. Once all paperwork has been completed, the Closing agent will typically send any required documents to the Lender for authorization. This is called a Lender Review to ensure that all documents meet the requirements of the Lender. This happens while the buyer is still at the closing table, typically taking around 15 minutes to complete.

Lastly, the Closing Agent will oversee the transfer of keys and disbursement of funds to all parties. As a buyer, keep in mind that it is your real estate agent’s ultimate responsibility to ensure that keys are available at the closing table.

There are a few standard steps taken during the post closing process.
1. The original and notarized loan package will be returned to the Lender.
2. Any funds or checks that were not disbursed at the closing table will be expended.
3. Documents are recorded in official records of the corresponding county (i.e. Warranty Deed, Mortgage, etc.).
4. Title insurance policies are issued.

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.

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.

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.

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.

For as long as you or your heirs retain an interest in the property and, in some cases, even beyond.