NOW THAT YOU’VE DECIDED TO BUY A HOME, WHAT’S NEXT?

The purchase of a home may well prove to be the largest financial investment you make in your lifetime. Therefore, the importance of fully protecting such an investment cannot be overstated. When you sign a contract to purchase a home and apply for a mortgage, your lender is going to require title insurance. Your lender will place a title order with a closing agent.

When the closing agent receives an application for title insurance their initial area of responsibility is to abstract the public land records in order to examine information surrounding the title to the property being purchased. This title investigation or search is referred to as the “Chain of Title.” The “Chain of Title” will reveal the following:

1. That the contract seller of the property is, in fact, the legal owners and that all owners are parties to the contract.

2. That the “estate” or degree of title that you have agreed to purchase is currently and accurately vested in the seller.

3. The presence of open mortgages, judgments or similar liens that must be satisfied before a “clear” title can be conveyed to you.

4. Existing restrictions, easements, or right of way for roads, public utilities, etc., which may limit your right to the use of the property, or grant rights to other who are not owners.

5. The status of property taxes and other public or private assessments.

Once this investigation or title search is complete, the information is supplied to your lender in the form of a commitment for title insurance. When your loan is approved and title examination is complete, a closing or settlement date will be set.

During the final settlement or closing stage of your purchase, the closing agent will work very closely with your lender and real estate agent. Acting in its fiduciary capacity, the closing agent will handle the transfer of all appropriate funds between buyer, seller, lender and all other interested parties.

The closing agent will prepare corrective documents to satisfy any deficiencies or discrepancies found in the examination. The closing agent will also prepare the documents necessary and appropriate to consummate the transfer of title and the mortgage loan. After the closing, the closing agent will ensure the closing documents are properly placed of record, including the Deed, Mortgage and Release of Liens related to the Seller’s interest, if any. Subsequently, the closing agent will prepare and issue any title insurance policies.

ARE THERE PROBLEMS A TITLE SEARCH CANNOT REVEAL?

Yes. There are some problems called “title defects” that are not revealed by a search of the record title that even the most diligent title researcher would not find in the public records. Although title defects are nothing new, they are occurring more often as our society becomes increasingly complex and mobile. And when defects do occur, they can lead to financial disaster. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by the legal spouse, fraud or forgery, defective deeds, mental incompetence, confusion due to similar or identical names, and clerical errors in the records. These defects can arise after you’ve purchased your home and jeopardize your right to ownership.

HOW DO I KNOW IF MY TITLE HAS A DEFECT?

That’s the problem... .you don’t. Prior to title transfers, attempts are made to find, among the numerous records, those documents and judgments that affect your title. If a hidden defect exists within or outside the records, it can still remain hidden. Consequently, the quality of most titles is not an absolute thing.

WHAT PROBLEMS CAN TITLE DEFECTS CREATE?

The problems are as diverse as title defects. If there is a claim against your title, even a nonvalid claim, you might be required to pay court costs and attorney fees. In another instance, you may not be able to sell your home until the defect is cleared. And finally, there is the chance that you could lose your property, thus wiping out your entire real state investment.

HOW CAN I PROTECT AGINST TITLE DEFECTS?

Your best protection is to purchase Owner’s Title Insurance. In fact, a policy of Owner’s Title Insurance has become standard practice in many cities and states.

WHAT IS TITLE INSURANCE?

Title insurance is your policy of protection against loss if any of these title defects, even title defects that a search could not reveal, result in a claim against your ownership.

ARE THERE DIFFERENT TYPES OF TITLE INSURANCE POLICIES?

Yes. A lender’s policy protects the lender for the outstanding balance of your mortgage, but affords the owner no protection. Only an Owner’s policy safeguards your investment or equity in the property.

An Owner’s policy will protect you, your heirs and other concerned parties, for as long as you and they retain an interest in the property. Owner’s Title Insurance will pay all the costs of defending against claims under the terms of the policy, regardless if they have merit or not. And, if you should lose your right to the property, Owner’s Title Insurance will pay the costs of litigation, plus the full value of your loss. However, protection doesn’t stop there. Owner’s Title Insurance assures the next buyer of a clear title, thus helping to facilitate the sale.

IS OWNER’S TITLE INSURANCE EXPENSIVE?

No. In fact, the cost of Owner’s Title Insurance is modest compared to what you stand to lose, even in court costs and legal fees. Different from other insurance policies, Owner’s Title Insurance is an affordable “one time fee.” The premium is usually based upon the selling price of the home. Owner’s Title Insurance is a small price to pay to protect your investment. There is no stronger safeguard of your title than an Owner’s Title Insurance policy.

WHEN IS THE BEST TIME TO BUY OWNER'S TITLE INSURANCE?

The most economical and prudent time is when you purchase any real estate. Request Owner’s Title Insurance prior to or at closing for your own peace of mind.