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WHY IS TITLE INSURANCE IMPORTANT?
One of the most important investments you will make is the investment in your home. You would not consider purchasing a home without homeowners insurance or driving a car without the necessary insurance. Title insurance is just as important as the above. Title insurance is issued after a title search and examination of the public records is completed from the county where the property is located.
What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes and many other documents. The purpose of the search is to verify the sellers' right to transfer ownership, and to discover any claims, defects, and other rights or burdens on the property.
Listed below are some of the most common title issues that can result in a claim against your title and more importantly, loss/cloud of that title.
- Unknown or missing heirs of an estate and/or misinterpretation of the estate.
- Improperly executed documents, i.e. lack of witnesses and/or notary.
- Improperly recorded documents.
- Errors in legal description.
- Deeds given by incompetent persons or minors.
- Unpaid taxes that a title search may not show such as estate or income taxes.
- Creditor claims
- Incorrect or misrepresented marital status
These are just a few examples of problems that could arise in connection with previous owners.
How Does Title Insurance Protect Me From these Hidden Risks and Defects in the Title?
Title insurance provides you protection against any lawsuit that may challenge your title, as insured, and will ensure either a clearance of those problems or will pay the insured's losses up to the face amount of their policy. This amount is usually based upon the sales price of the home.
Why Do I Need Title Insurance When I am Furnishing A Loan (Mortgage) Policy To My Lender?
The mortgagee policy only protects the lenders interest. There are two title policies which can be issued at the time of purchase. An owner's policy which insures the new owner, and the lender's policy which insures the lender. The mortgagee policy is a requirement by the lender and solely protects the lender's interest from liability should a claim arise. The title insurance company would defend and protect the interest of said lender in that instance. You, as the owner, would not be covered under the lender's policy and would be responsible for the defense of the claim including but not limited to legal defense if necessary.
How Do You Choose A Reputable Title Company?
There are several things to look for when choosing a title company.
The following will give you a guide for that choice:
Experience is one of the most important of all aspects when choosing a title company. The title defects discussed can only be solved by a trained professional who knows how to correct said title issues.
Skill ensures a timely response and resolution to any questions or issues that may arise during the processing of your closing.
An experienced title agent will know that building a good rapport with their client is an integral part of the closing process. Open communication must exist to enable a title agent to foresee problems as well as solve them.
What does title insurance cost?
Fees vary per different sections of the country, but generally the cost of title insurance, including search, exam and related services, amounts to about 1 percent or less of the cost of the property.
What is a closing?
Closing, which is also known as settlement or escrow, is the event where the title to the property is transferred from seller to buyer. Closing is typically held in an office, such as the title company and involves the completion of all of the forms or paperwork to finalize the agreement between seller and buyer. Also, all financial issues are settled at closing. Once the title is successfully transferred, the necessary documents are prepared, signed and filed with the local authorities.
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