First, let’s define a title. In real estate, a title gives the holder the right to possess, occupy, use, et al a piece of land. The title conveys the rights of ownership to the property. Title insurance will protect you from possible issues or defects in the title (such as forgeries or unknown heirs).
When purchasing a home, you will have the option to purchase title insurance. There are two types of policies: lender’s and owner’s. If you are buying your home with financing, your lender will most likely require a lender policy to protect the loan amount and lender.
From there, you will have the option to purchase an owner’s policy, which would protect the home’s entire value.
A title search is conducted to locate any potential problems that may impact the transaction during the escrow process. In addition, a title search also discloses easements, rights-of-way, restrictions, and mineral reservations, among other matters.
While most problems can be located in a title search by skilled professionals, nearly one-third of all transactions reveal a title or public record defect that even the most thorough search would not show.
Title Insurance can protect you against:
- Defects in the title including unrecorded easements, forgeries, or other undisclosed contract issues such as the city having an easement for utilities in the exact spot where you want to build a pool.
- Loss due to unknown encumbrances, including liens, judgments, or security instruments. For example, if the last owner didn’t pay the roofer and now there is a lien against the property; you will not inherit the bill.
- Title claims to the property. By way of example, a long-lost heir knocking on your door to say the house should have been passed to them.
- Lack of legal access to the property (to keep you from getting landlocked to your home).
- Loss if you are forced to remove structures. For example, if a structure encroaches on your neighbor’s property.
In addition to the standard title policies, a good title company will also handle the American Land Title Association homeowner’s policy, extended owners and lenders policies, other lender policies, trustee’s sale guarantees and judicial litigation guarantee reports.
Remember, title insurance protects you against the potential loss of your most valuable asset – your home or property.
– Tom Davis, Pioneer Title Agency