What Is Title Insurance?
Title insurance is an insurance policy that insures your ownership interest to your piece of real estate. The title examination department of your chosen abstract or title company fully researches the public record of the property you are buying to trace the chain of title, and related encumbrances such as shared interests, tax or judgement liens, or clouds in title. They also search to see that the person selling you your home or property truly owns it and has the legal right to convey it to you.
What Is The Purpose Of A Title Insurance Policy?
As a buyer of any real property, whether it is residential, commercial, farm and ranch, or just raw land, it is important for you be protected against losses you might incur because of existing defects in title to the property. Those defects could result from such things as outstanding mortgages or liens, unpaid real estate taxes, breaks in the chain of title, fraud, forged deeds, restrictions on the use of the property, and any number of other problems, some of which may be unknown when you buy the property. An owner’s policy of title insurance protects you, as a buyer, against any monetary losses you may incur because of title defects, up to the face amount of the policy. Just as you are protected by your owner’s policy, your mortgage lender is protected against title defects which might invalidate its security interest in the property by a lender’s policy of title insurance.
What Are The Costs Of Title Insurance?
In Texas, the rates for title insurance are set by the Department of Insurance. There is a one-time premium that is typically paid at closing, and is based on the sales price of the property. In the event you sell your property, there are also small closing costs that apply. Other states have similar statutorily regulated rates for title insurance premiums.
Who Pays For Title Insurance?
There are two basic types of title insurance, Owner’s Title Insurance (protection for the buyer) and Mortgagee’s Title Insurance (protection for the lender). Often, the Seller pays for the Owner’s Title Policy and the Buyer pays for the Mortgagee’s Policy, but just as you’ll find with many items related to your transaction, everything is negotiable between the Buyer and Seller.
What Are Some Of The Dangers Of Not Having Title Insurance?
As real estate professionals, we ALWAYS recommend that our Buyers make the investment in title insurance. There are simply too many risks to not having this protection to list. Some of the most common are things such as the Seller not actually owning the property he is selling, outstanding liens against the property that limit a Seller’s ability to convey title, unpaid taxes, an ex-spouse who has an interest in the property, Federal or State liens and suits, and forgery, just to name a few.
Why Do You Need Title Insurance?
Many title problems can arise to cause the complete or partial loss of your home or business property.
Even the most careful search of the public records will not find every title problem. Because some problems are hidden, your title may appear to be perfect when, in fact, there may be a serious problem that could affect the validity of your property’s title.
Owner’s title insurance protects you against financial loss caused by covered title risks. As the insured, you will be defended against an attack on the title to your property without expense to you. If the attack is successful, the title insurer will indemnify you against the defined financial loss up to the policy limit. A small one-time premium provides you with this valuable protection.
Examples of Things That Are Covered
- Documents executed under duress.
- Defective acknowledgement.
- Deeds by minors.
- Inadequate legal descriptions.
- Easements established through continued use but not discovered by a survey or in the public record.
- Mistakes in recording legal documents.
- Mistaken reports furnished from taxing authorities.
- Misinterpretation of wills.
- Deed of community property recited to be separate property.
- Errors in tax records. (For example, listing payment against wrong property account.)
- Birth or adoption of children after date of will.
- Falsification of records.
- Undisclosed or missing heirs.
- Errors in indexing of legal documents by the County.
- Surviving children omitted from a will.
- Deeds to or from defunct corporations.
- Marital rights of spouse allegedly, but not legally, divorced.
- Instruments executed under fabricated or expired powers of attorney.
- Forged deeds, releases, etc.
- Deeds by person supposedly single but secretly married.
- Deeds from persons not competent to handle their affairs.
Learn more at American Land Title