Title Insurance
Ensuring your property is free from defects, liens, or encumbrances with our comprehensive title insurance.
What is Title Insurance?
Title insurance is an essential part of the home-buying process. Unlike most insurance, it looks back in time rather than forward. It protects homeowners and lenders against financial loss that can occur due to title defects that were hidden or otherwise unknown in the title search and review process. It protects buyers from unwelcome surprises down the line.
Why is a title search crucial to a mortgage?
Because it verifies the ownership of the property, ensures that the lender’s interest is secure, and shows that the property is free from liens or other encumbrances that could pose a threat to the loan.
A title search is an examination of public records and other material that can go back 50+ years. It will uncover any problems associated with the property such as liens, past-due property taxes, court judgments and claims. There may even be disputes over a will crafted by a past owner, or undisclosed heirs.
Finding and addressing these issues before the transfer of the property protects the lender and the new owner. Title insurance protects against these risks.
What is the difference between lender’s title insurance and owner’s title insurance?
Lender’s title insurance protects the lender from title defects that could prevent the mortgage from being valid and enforceable against the property. Examples include fraudulent acts or prior liens. It also insures the lender is in a first-lien position in the event of a default or foreclosure. Lender’s coverage also helps ensure the mortgage will not be hampered by unknown encumbrances. Some problems if uncovered during the lender’s title search could hinder the present owner’s ability to sell or the buyer’s ability to borrow.
Owner’s title insurance protects the new buyer. It’s the largest financial transaction in most people’s lives—no one wants to discover there are old or unpaid liens from the previous owner on the property, which would prevent the new buyer from cleanly selling the property down the line. If title defects are hidden or missed during the title search, title insurance provides financial protection for expenses related to resolving the issue.
What are the most common title problems?
There are many issues that can impact title to a property. These are among the most common:
- Liens
- Property taxes
- Illegal deeds
- Inheritance issues
Liens
A lien is a legal claim to assets, and liens pop up frequently during title searches. If improvements have been made to the house, contractors file liens – financial claims – to ensure they’ll be paid. Some liens are not filed properly; others are never properly marked that the payment has been made. Liens can take weeks to resolve, especially if, in the example of contractors, they are no longer in business or have left the state.
Property taxes
A deep dive into the history of the property could uncover delinquent taxes – i.e., real estate taxes that were never paid and are still owed to the government. Since annual property taxes can be 1-2% of the purchase price or more, depending on the state, it’s well worth finding out whether they’ve been paid.
Illegal deeds
A deed is a legal document that formally transfers property ownership from one person or entity to another. In the past, deeds may have been held by those who had no right to possess one, such as a minor. Any problems with past deeds may affect present ownership.
There are also illegal deeds that are obtained through forgery or impersonation of a property’s true owner.
Inheritance issues
A past inheritance could cause conflicting claims to the property. A title search will uncover if they exist and if they have any impact on the transfer of the property.
How are title issues resolved?
It is up to the seller to fix any title problems in order to provide clear and marketable title for the transfer of ownership. For example, if the issue is delinquent taxes, the seller must pay them for the transaction to proceed. Even minor issues must be addressed, or the sale cannot proceed.
Is title insurance available in all states?
Some form of title insurance is generally available in all states, specific policy offerings can vary. For example, Iowa outlawed private title insurance in 1947 when a number of insurers failed after a severe real estate downturn. The state of Iowa now acts as a type of title insurer known as the Iowa Title Guaranty.
In Conclusion:
Every homebuyer should opt to purchase title insurance and find out everything they need to know before buying title insurance. Why? Unless you ask a title company to perform a title search, you will have no idea what troubles from the property’s past can come back to haunt you. Given the size of your investment in a new property, the last thing that you need is an unexpected large expense.
