Title Insurance

 

When purchasing a home one of the additional fees paid at closing is for Title Insurance. Knowing what that fee gives and the benefit you derive from the fee greatly relieve your apprehension towards payment. Title insurance can save your home or a host of absurd conflagrations that may take place.

There are generally two policies purchased, one for the homeowner and one for the bank giving the loan for the property. In today’s buyers market, the seller often pays these fees, but each sale can have its own provisions.  

A book definition of title insurance would be: An insurance policy that protects a home owner and the lender against loss or damage due to defect in the property’s title. Additionally today, most title insurance companies offer policies which go much further than protecting just a title defect.

The “Title” of a property is exactly what someone would expect; who legally owns the property. As property sales evolved, buyers wanted some form of assurance that they were legally entitled to what they were buying. In the early days of our nation’s history there were many disputes, frequently scams, as to the true owner of a property. Governments were given the duty to keep records of property ownership. From these records grew the title insurance industry. “Title Plants” or warehouses of records were kept to help various parties discover whether a property is properly “vested” with “Chain of Title.” Many companies began offering insurance policies as to the validity of the ownership of the property. In California, these companies are regulated by the State Insurance Commissioner.

A standard policy or C.L.T.A. will give protection to matters of record, forgery, impersonation, errors in recording and certain tax liens among other areas. The insurance policy will either pay legal fees defending claims against a homeowner, the claims themselves or for the loss of the property.

 

A standard policy will not cover

 

An extended policy or A.L.T.A. will give protection against several of the preceding areas. Today many title companies offer upgraded policies that will go into areas such as building permits, encroachments of fences or walls, trusts and various legal issues. Your chosen Title Representative and office will be able to show the home buyer the difference between the policies and prices for each.

 

During the contingency period after an offer has been made on a home, a title insurance company will quickly prepare a “Preliminary Title Report.” This is an offer from the company to issue a policy. It is important to understand that it is a report and not a policy. A qualified realtor will be able to read this report and if there are questions the “title rep” will gladly discuss, research and find the meaning to any areas of concern.

The property purchaser should read and fully understand all the areas covered in the report and base their moving through the contingency process and purchase of the property based on understanding and accepting all aspects of the report.

 

If you feel I have left out constructive information, please comment.