When purchasing a home or other real estate, you actually
don't receive the land itself. What you acquire is title to the
property, which may be limited by rights and claims asserted by others.
Problems with title can limit your use and enjoyment of real estate,
as well as bring financial loss. Title trouble also can threaten the
security interest your mortgage lender holds on the property.
Protection against hazards of title is available through a unique coverage
known as title insurance. Unlike other kinds of insurance that focus
on possible future events and charge an annual premium, title insurance
is purchased for a one-time payment and is a safeguard against loss arising
from hazards and defects already existing in the title.
There are two basic kinds of title insurance:
- Owners coverage
- Lenders, or mortgagee, protection
Owners title insurance ordinarily is issued in the amount
of real estate purchase and lasts as long as the insured, or his / her
heirs, have interest in the property concerned. This may even be after
the insured has sold the property.
The amount of lenders title insurance decreases and
eventually disappears as the loan is paid off. Most lenders require mortgagee
title insurance as security for their investment in real estate, just
as they may call for fire insurance and other types of coverage as investor
An important part of title insurance is its emphasis
on risk elimination before insuring. This means the insured has the best
possible chance for avoiding title claim and loss.
Title insuring begins with a search of public land records
for matters affecting the title to real estate concerned, The examination
of evidence from a search is intended to fully report all material objections
to the title. Frequently, instruments that don't clearly pass title are
found in the chain, or history, of ownership assembled from the records
in a search. These need to be corrected before a clear title can be conveyed.
Here are some examples of instruments that can present some concerns.
- Deeds, wills and trusts that contain improper vesting
and incorrect names
- Outstanding mortgages, judgments and tax liens
- Incorrect notary acknowledgements
Through the search and the examination, title problems
like these are disclosed so they can be cleared up whenever possible.
But even the most careful preventive work cannot locate hidden hazards
Hidden Title Hazards
In spite of all the expertise and dedication that goes
into a search and examination, hidden hazards can emerge after completion
of a real estate purchase, causing and unpleasant and costly surprise.
Some examples include the following.
- A Forged deed that transfers no title to real estate
- Previously undisclosed heirs with claims against
- Instruments executed under expired or fabricated
power of attorney
- Mistakes in the public records
offers financial protection against these and other hidden hazards through
negotiation by the title insurer with third parties, payments for defending
against an attack on title as insured, and payment of claims.
Because of title insurance, homebuyers can enjoy complete
protection against claim and loss. When title insurance is provided,
lenders are willing to make mortgage money available in distance locals
where they know little about market conditions.