December, 2007
Questions About Title Insurance?
Title Insurance is extremely important when purchasing a house or piece of property. Yet many consumers are unsure about what title insurance is and what it protects against.
Types of Title Insurance
There are two types of title insurance: Lenders title insurance, also called a loan policy, and Owner’s title insurance. Most lenders require a Loan Policy when they issue you a loan. The loan Policy is usually based on the dollar amount of your loan. It protects the lender’s interest in the property should a problem with the title arise. The policy amount decreases each year and eventually disappears as the loan is paid off.
Owner’s title insurance is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing and lasts as long as you or your heirs have an interest in the property. This may even be after the insured has sold the property. Only Owner’s title insurance fully protects the buyer should a problem arise with the title that was not uncovered during the title search. Owner’s title insurance also pays for any legal fees involved in defending a claim to your title.
How am I Protected?
In order to issue title insurance, the title company must search public land records for matters affecting that title. Many search the “chain” of title back over fifty years. Twenty-six percent of title searches find a title problem that is fixed before the insurance is issued. Some examples of items that can cause a problem are: deeds, wills and trust that contains improper information; outstanding judgments or tax liens against the property; and easements. Title companies fix the problems then issue the title insurance.
Occasionally, in spite of an exhaustive search, hidden hazards can emerge after the closing. Things such as mistakes in the public record, previously undisclosed heirs claiming to own the property; or forged deeds could cloud the title. Owner’s insurance offers financial protection against these by negotiating with third-parties, and paying claims and the legal fees involved in defending the title.
I’m refinancing, why do I need title insurance?
When you refinance you are obtaining a new loan, even if you stay with the original lender. Your lender will require lender’s title insurance to protect their investment in the property. You will not need to purchase a new owner’s title policy; the one you bought at closing is good for as long as you and your heirs have an interest in the property. Even if you recently purchased or refinanced your home, there are some problems that could arise with the title. For instance, you might have incurred a mechanics lien from a contractor who claims he/she has not been paid. Or you might have a judgment placed on your house due to unpaid taxes, homeowner dues, or child support, for instance. The lender needs reassurance that the title to the property they are financing is clear.
I’m buying a newly built home, so I need title insurance?
Construction of a new home raises special title problems for the lender and owner. You may think you are the first owner when constructing a home on a purchased lot. However, there were most likely many prior owners of the unimproved land. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased. In addition, the builder may have failed to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property. Again, lenders want to be sure the property has clear title, and they are insuring the correct property. Purchasing Owner’s title insurance will protect you against these potential problems and pay for any legal fees involved in defending a claim.*
* ALTA– Consumer Information– Questions About Title Insurance
H.B. Wilkinson’s President Dan Mennenoh Elected President of TIAC.
At the 100th annual convention of the American Land Title Association (ALTA) held in Chicago in October, Daniel Mennenoh, President of H. B. Wilkinson Title Company, was elected to serve a three year term on the association’s Abstractors and Agents Section Executive Committee. This committee addresses the specific issues that affect abstractors and title agents throughout the country. In addition, Dan was also elected President of Title Industry Assurance Company (TIAC), which is the professional liability insurance company that is owned by members of the title insurance industry in the United States. TIAC was established 19 years ago by the title insurance industry, through ALTA, in order to provide stable errors and omissions insurance coverage for abstractors and title agents who are ALTA members. Dan has been serving on the board of directors of TIAC for the past year. Congratulations Dan on your newly elected positions!
