When you sell property, borrow money and/or use your real estate for security a title insurance policy, guaranteeing a clear and marketable title, is generally required. Title insurance policies are issued by title insurance companies.

If a claim should be made against an insured property the title insurance company will defend those insured, settle the claim, or if proven in a court of law, pay the loss of the insured up to the limits of the policy.

There are two basic types of title insurance policies - a Lender' Policy and an Owner's Policy.

(1)The Lender's Title Insurance Policy protects the lender's security interest for the outstanding balance under the buyer's mortgage.

(2)The Owner's Title Insurance Policy protects the interests of the buyer against a loss created by adverse claims against the property for events that occurred prior to their purchase of an insurance policy on the property.

Title insurance companies also close real estate transactions. Closing real estate transactions at the same place as insured gives all parties involved with the transaction the convenience of doing business in one place and provides efficient and timely service to all by an independent and impartial third party.

Common Questions & Answers

What is a title?
A title is the legal right of a land owner to possess and use their land.

What is title insurance?
Title insurance is a policy, written and issued by a title insurance company, guaranteeing a clear and marketable title.

Why does the seller buy a title insurance policy?
Any prospective buyer or buyer's lender will need evidence and a guarantee that their investment or loan on the seller's property is free of title defects. The only acceptable means of guaranteeing a clear and marketable title is a title insurance policy.

If the real estate owner has a deed isn't that proof of ownership?
No. A deed is not proof that the seller actually is the legal owner. Nor does it contain information regarding the rights others might have in the property.

Is a buyer required to buy a title insurance policy when they purchase real estate?
No, but it is prudent of them to do so if the seller does not provide one. The Lenders Policy covers the interests of the lender. It does not cover the interest of the buyer or borrower.

Why do property owners have to buy the lenders policy when refinancing or using the real estate for collateral?
Institutional lenders protect the interests of their investors and stockholders and their financial position by insuring that the quality of the title to the property pledged as security for the loan is satisfactory. A title insurance policy is the only acceptable means of providing this type of security and assurances.

What is a title search?
A title search is a detailed examination of the historical records concerning a real estate property. The purpose of the search is to verify the owner's rights to the property and to discover any claims, defects and other rights or burdens on the property. The title insurance policy issued by the title insurance company is based on the search.

Are there any problems a title search cannot reveal that may jeopardize ownership?
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 marital status, resulting in a possible claim by his 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.
• Defects occur because all of the necessary information is not contained in a single book, in a given office, or even in the same city. Plus, there could be possible errors in indexing, improper searching, and errors in examination; in other words, the human element. Most of the time, what is not in the public records is what causes title problems.
• If you have purchased an Owner's Title Insurance Policy the insurance company will legally defend your ownership position and cover any loss you may occur if claims are proven to be legitimate and/or up held in a court of law.

How much does title insurance cost?
Generally the cost of title insurance (including search, examination and related services) amounts to less than one percent 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 when the transaction is closed.

Do title insurance companies give special deals?
Yes. Rates are determined by the type of transaction and offer variable options. When inquiring about rates always explain the transaction, the protection you desire and ask for applicable rates.

For more details about selling, buying, refinancing, title insurance and escrow closings we recommend the following web sites..

STEWART TITLE GUARANTY

AMERICAN LAND TITLE ASSOCIATION

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