What is title insurance?

By definition, title insurance is “A policy issued by a title company after searching the title and which insures against loss resulting from defects of title to a specifically described parcel of real property or from the enforcement of liens existing against it at the time the policy is issued”. In layman’s terms, imagine a basket of sticks. This basket of sticks is the property you are about to purchase. When you have a lien on the property, someone has taken a stick from that basket. When you have a homeowners association, someone else has another stick. When you have construction being done, yet another person has a stick. The job of a title insurance company is to find out who has all of the sticks from this basket and insure that there are no more sticks mysteriously hiding from that will appear years later when you own the property.

Why do you need title insurance?
To protect your most important investment – your property!

What does title insurance protect against?
Here are a few dangers that can cause an encumbrance or a hurdle on title:

  • Liens
  • Fraud
  • Foreclosures
  • Mistakes in recording legal documents
  • Forged or misinterpreted deeds, releases or wills
  • Untrue impersonation of the real owner of the property
  • Missing spouses, deeds by minors, deeds by persons of unsound mind, deeds by persons allegedly single but legally married

What is a title search?
The title search determines from public records who has rights to the property. It validates that the person selling the home is free and clear of any other person or company holding rights to the property they are trying to sell to the buyer, and that the buyer is getting sole rights to the property.

What is a Chain of Title?
By definition, it is “The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent”. In other words, it’s an entire history of the ownership of the property.

What is a Commitment?
This is a report that states whether or not there are any other claims to the ownership of the property. This will give the lender security for a new mortgage loan or allow issues that need to be addressed to come to light.

How much does title insurance cost?
Title insurance and deed stamps must be the same cost from title insurance company to title insurance company. There are fees that may differ from company to company, however, such as search and exam, administration, courier and closing fees. Our fees are extremely reasonable, much lower than that of our other title company competitors, and we also have no hidden fees or upcharges. We encourage you to always ask about hidden fees or upcharges when shopping for title insurance.

Why do buyers need title insurance
Without a title insurance policy, there is no protection for the buyer. Any hidden problems not disclosed by public records or a mistake in tile examination might hold the buyer accountable for any prior issues relating to the property. The title insurance policy insures that you are free of being held responsible for those claims that may arise.

What can make a Title Defective?
Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These hidden “defects” are dangerous indeed because you may not learn of them for many months or years. Yet they could force you to spend substantial sums on a legal defense, and still result in the loss of your property. But the lender already requires Title Insurance, won’t that protect me? Not necessarily. There are two types of Title Insurance. Your lender likely will require that you purchase a Lender’s Policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it. An Owner’s Policy on the other hand is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner’s title policy covers the full cost of any legal defense of your title. What items are needed at closing? You will want to have these items complete or in hand when you come to the closing (please confirm with your escrow officer, as practices vary by state):

Can I add someone to my Deed?

Yes, as a homeowner you may add a party to your Deed, however depending on the relationship as well as when you do so, will make all the difference in fees and charges that are applicable. These fees range from Attorney Deed prep charges, to Recording and Transfer Taxes to the state and municipality. For example, you may add or remove a spouse from title without being charged transfer taxes, it may be just to take them off the house or pursuant to a divorce or separation, but please note* this will not remove them from the mortgage if one exists because that debt needs to be paid off and released in order to remove their name from it. Unless a mortgage assumption is done with the lender you can’t just take someone off a home and think the mortgage changes as well. You may also add children, however, keep in mind that once they are on title, they will be needed to do anything with the home going forward. That includes, selling refinancing or encumbering, like adding a line of credit. Also, what ever happens to them can and may affect your property. So, seek legal counsel before considering this option.

Call us at Columbia Title and Escrow if you have any questions related to real property.