Title insurance protects you and your property against title defects such as past owner’s mechanic liens, debt, tax liens, zoning violations, building code violations, past due utility bills, closing errors, marital rights, inheritance issues, and other claims of ownership that may have been instituted prior to your purchasing the home. If future claims should come back to haunt you, the title policy will cover them.
Policy
Title Insurance Owner’s Policy
Every owner should get a title policy:
- Title insurance protects you against past problems
- Paid for one time
- Good for as long as you or your heirs retain an interest in the property
- Average cost: varies widely per state
Loan Policy
Only buyers with a mortgage will need this policy:
- Policy required by the mortgage lender to protect against title defects that could affect the lien of the lender’s mortgage
- Paid for one time
- Effective for the life of the loan
- Average cost: varies depending on credit score, loan to value ratio, and state
What is a Title Search
The title company that handles your closing will research the chain of title and outstanding liens. They will review Federal, State, County, and local records to ensure that there are no clouds on the title. The title search process entails the following steps:
1) Examine:
- Identify title defects
- Issue preliminary title report/ title commitment
- Identify curative actions
2) Cure:
- Remove “clouds” on the title
- Settle existing liens
- Resolve title issues
3) Close:
- Issue title policy
- Disburse funds
- Transfer ownership
Your closing company or attorney will arrange and purchase your title policy for you, the premium will be included in your closing costs.
The 10 Most Common Title Problems
- Forgeries
- Public records errors
- Illegal deeds
- Unknown liens
- Missing heirs
- Undiscovered encumbrances
- Unknown easements
- Survey & boundary disputes
- Undiscovered wills
- False impersonation of a previous owner
