What is Title Insurance?
Owner’s title insurance is purchased when you buy a home, and it protects your right to your home for as long as you or your heirs own your property. It protects the homeowner, and the lender, after settlement from any losses that may result from issues or title defects that were unknown before they purchased the home. Many buyers ask, do I need to get title insurance?
Without title insurance buyers would have no way of knowing if the seller’s actions may have caused future problems for the next homeowner. For example, the seller may have:
- avoided disclosure of using the property as collateral for an unpaid loan
- frauduelently claimed to be the sole owner
- failed to pay real estate taxes
- even a simple mistake in the recording of legal documents
Owner’s Title Insurance Protects Your Rights
If ownership of the property is ever challenged, the insurer defends your possession of the property. If a challenge to your property title is ever legitimate the insurer will pay for your losses, as your title insurance policy specifies.
- It protects you against false title claims by previous owners or lien holders.
- It protects you as long as you have an interest in the property.
- It insures against events that occured before the policy is issued, unlike other forms of insurance.
How Title Insurance Works
As property changes hands, mistakes and irregularities can place your ownership of the home in dispute. The mistakes are often made long before you made the purchase.
The title company searches the public records for documents associated with the property and provides the buyer with an expert, interpretive view of the impact of all recorded matters on the property’s title. If the search reveals recorded defects, liens or encumbrances on the title, such as unpaid taxes, unsatisfied morgages, easements, or restrictions, etc., these are reported prior to purchase, and solutions are put in place to resolve the impediments.
Even when the title search is extensive, problems can still arise after the home is purchased. This is when title insurance prtects the new owner from hidden defects, and protects the owners interest in the property.
29 Issues Where Title Insurance Saved the Day
Owner’s title insurance protects you as well as your heirs from financial loss caused by title trouble. Compared to the damage any of these troubles can cause, the one-time premium is small. Here are 29 title troubles that really do occur:
- False impersonation of the true owner of the land
- Forged deeds, releases, etc.
- Instruments executed under fabricated or expired power of attorney.
- Deeds delivered after the death of the grantor or gratee, or without the consent of the grantor.
- Deeds to or from defunct corporations.
- Undisclosed or missing heirs.
- Misinterpretation of wills.
- Deeds by peoplee of unsound mind, or by minors, or by aliens.
- Deeds by people secretly married.
- Birth or adoption of children after the date of the will.
- Surviving children who were omitted from a will.
- Mistakes in recording legal documents. (human error, it happens)
- Errors in indexing.
- Falsification of records.
- Claims of creditors against property sold by heirs or devisees.
- Deed in lieu of foreclosure given under duress.
- Easements by prescription not discovered by a survey.
- Deed of community property recited to be separate property.
- Errors in tax records. (for example, listing a payment against the wrong property)
- Deed from a bigamous couple.
- Defective acknowledgements.
- Federal condemnation without filing of notice.
- Descriptions apparently, but not actually, adequate.
- Corporation franchise taxes, a lien on all corporate assets.
- Erroneous reports furnished by tax officials.
- Administration of estates of persons absent but not deceased.
- Undisclosed divorce of spouse who conveys as the heir.
- Marital rights of spouse purportedly, but not legally divorced.
- Duress in execution of intruments.
The Cost of Title Insurance
Many home buyers question whether the purchase of title insurance is really worth the cost. The costs and details of who pays for the owner’s title insurance policy differs from state to state, depending on state laws, local customs and agreements made in the real estate contract.
There are title insurance calculators on most title company websites; you can get a rough estimate of what title insurance costs will be. To get a general idea, as a very rough estimate, for a home in Frederick Md with the average price of $300,000, basic title insurance will be in the neighborhood of $1400 to $1600, depending on details. An enhanced title ensurance package will be About 10% more. [these are not quotes, but rough estimates]
Even when the title company does a careful search of the public records, title troubles which weren’t disclosed, or mistakes in public records – called hidden hazards – are all possible. Even if your abstract is perfect, your title could be worthless because of any and more of these common issues. Your title attorney’s examination may be the absolute best, but your title may still be fatally flawed. The best remedy is title insurance.
Thanks to Salisbury, McLister and Foley, LLP for the information above. We’ve been happy to refer Pat McLister for 24 years, and are never disappointed in the settlement company’s service. They’ve never been late, and always go a step above to provide our clients steller service.