What is title insurance?
Title insurance protects property owners and lenders against any loss they might experience because of liens, encumbrances or defects in title that should have been detected during a title exam. One example of a title defect is discovering improperly prepared or executed documents, such as an incorrect deed from a previous sale. Each title insurance policy is subject to specific terms, conditions and exclusions.
Does this insurance renew each year?
While other types of insurance are renewed each year, such as auto, homeowners or flood insurance, title insurance is paid one time when you buy a property. If you finance the property, there are actually two policies issued at one time, the Owner’s Policy insuring you, and the Loan Policy insuring the lender. Both policies remain in place until you sell the property or pay off the loan.
The issues addressed and insured
Title insurance covers future losses related to disputes over ownership, boundary lines, or a lien release. The title agent/attorney will obtain a title exam or abstract report to ensure the chain of title is up to date, that liens by past owners are paid and released, and that taxes/assessments are paid. A property survey will be analyzed for accuracy. The title policy protects you if any of these steps are mishandled.
The important of title insurance
Approximately 50% of all real estate transactions include a problem somewhere in the chain of title. Title agents/attorneys help to identify and correct these problems, enabling transactions to go through and allowing buyers to have peace of mind about their new home purchase. If an issue arises after the transaction closes, that should have been addressed, the agent or attorney will assist in a resolution.
Deed preparation and transfer
Title agents or attorneys may provide deed preparation of transfer services for parties seeking to add or remove a property owner, at closing or in the future. Transfers are often necessary to remove a former spouse or family member previously on title. There are also instances when owners desire to transfer property into a Trust. Deed transfers on mortgaged properties are restricted, seek legal counsel.
Sale by owner
Title agents or attorneys often handle property sales where neither party, buyer or seller is represented by a real estate broker. Private property sales are best handled by a title expert to ensure ownership transfers are prepared and recorded accurately, that liens are released and taxes paid, etc. All funds should be handled by the attorney/escrow agent to ensure proper disbursement.