Title Insurance
You've probably realized already that your decision to buy a house is probably one of the largest and most important decisions you may ever make. It may seem like a joke but sometimes even if you've paid for a certain property it may turn out that in fact you don't have any right to it because it belongs to somebody else. Crazy but it's true and it has happened before. A friend of a friend bought a house only to find out later -- when she ordered land survey to establish the property's boundaries - that the actual border of her property ran through her house; one-third of her house was on somebody else's property!
Naturally, you and your lender should ensure that the property you buy is yours and that no one will ever have any claims, liens or any other rights to your own property. Title insurance is a guarantee that the title to real property is not affected by anything and is free from disputes that may exist in the public records for your property. Some of the possible disputes that may affect your property are:
Forgery and errors and omissions in property deeds. Errors in examining past records and therefore wrong records entered into a property file. Undisclosed and / or missing heirs to the property. Liens for unpaid taxes as well as liens by contractors.
Your title insurance basically makes sure that the seller has all the legal rights to the property and has sellable title to the property which he / she has put on the market. Once a title insurance is being considered, a title search is performed by the title company or the attorney that is handling the closing of the sale.
The title search reveals, among other things about your property, liens and claims against it - if they do exist - as well it ensures that the sellers have a rightful title to the property. The insurance is issued for the lender and it protects you, the buyer; the lender's policy protects the lender for any errors in the title up to the amount of the loan. Your policy (the owner's policy) guards you against any errors in the title. This policy is good as long as you are the owner of the property. It covers the circumstances and the events that might have occurred in the past, even before you took the official title to the property.
Prior to issuing the policy the title insurance companies will examine all the public records such as mortgages, divorce decrees and court judgments, tax records, encumbrances and maps; it also checks for the outstanding debts.
Title companies handle property closings as well and they hold earnest money in an escrow account (trust account) until the purchase of your property is completed.
New homeowners often ask about the fees that they're charged for the title insurance and title searches. You may wonder if they're being regulated by the state or by the separate individual title companies and if the fees are negotiable in any way. You and the seller may accept the title insurance fees without asking any questions assuming that the fees are set forth by the title company or the closing agent.
However, not all the title insurance fees are the same. The title insurance fees may be different from state to state and may not even be set by law in every state. In some states, title company may set its own rates ant then file the fees that are with the state insurance commissioner.
When the feels are filed they must be adhered to. In some states there may be a rate that is called a 'promulgated rate' - this is the minimum amount that is set by state law, where a title insurance company has to charge for title insurance as well as title searches and the title company is allowed to charge a higher rate if it desires to.
If you have any doubts about title insurance fees it is probably the best idea to talk to your closing agent at the beginning of the escrow process to determine what the charges will be for title insurance. You should probably ask the closing agent if they're charging the lowest rates allowed by the state or if the rates they're charging have justification for their amount. There's no reason why you shouldn't research a few of the title insurance agents and their closing fees before you decide to go with one. You'll probably find that the fees are different from one title insurance company to another.
Realistically, even a small saving of $100 is worth your time and effort in looking for the best title insurance rate because there are so many closing costs already, that are not negotiable and that you will have to pay for. You'll see any savings in the closing fees will be appreciated when you have to regulate the final bill to close all the transactions.
A number of title insurance companies choose to combine the title insurance premium along with the closing, search as well as inspection fees. It is possible that this is the case in your state; many title insurance companies have standard fees that cover all that and are dependant on the price bracket that your house fits into. For instance, if your house costs you between 130 - 135 thousand your fee would be $730, no more, no less.
Such fee will include the title premium, the search, closing and the inspection fees and the rate will go up according to the sales price. There might be some small additional fees if there are any extra endorsements ($30 - $40 a piece); ask your closing agent or the title insurance company what the exact fees are before you proceed.
So why do you need this title insurance? There a number of reasons why having title insurance and performing a title search is an excellent idea when completing the purchase of your Real Estate:
· First of all, the title insurance protects you as well as your lender if there's ever a question about your right to the property because of alleged title defects which you weren't aware of when you first bought the property and made sure the title insurance was secured. These sort of challenges arise after the closing and are not uncommon.
· Your title insurance policy also contains certain provisions for the payments of legal fees in defense of a right claim to your property; this is covered under your title policy.
· Additionally the title insurance contains provisions for payment of loses which may result from a covered claim. The coverage can benefit you and your mortgage company as well.
You as well as your lenders (mortgage company) need title insurance to protect yourself from any legal disputes regarding the ownership of your property. Title companies will normally issue two types of policies such as an owner's policy that will ensure that the mortgage company's security interest is evaluated first before the claims that others may have in the property, are. Such protection is limited to the value of your property. In some states you and your lender are covered under one title insurance policy.
How much of insurance you may need depends on the full purchase price of the property - you'll need to cover it all. Your mortgage company will need insurance policy only for the amount of the loan.
The premiums for title policies are determined by local practice, not the law itself. This could mean a certain negotiation between you and the seller. The escrow officer should give you an advice about who would normally pay the different premiums in your area.
Title insurance premiums are based on the amount of coverage that has been provided. The schedule of forms, rates, and rates modifications is required to be filed with the insurance commissioner and should be available for public viewing.
As mentioned before, it is a good idea to shop around for the rates because you can actually save on those. The competing title insurers and underwritten title insurance officers will offer different types of services and different costs for the title insurance that is required in the property transaction so that rates will naturally differ from company to company. A number of title insurance companies will also offer short-term rates on property that has been re-sold in shorter amount of time (less than five years, usually).
You'll need to talk to your escrow officer or the title officer to see how and if your property can qualify. The choice of which title insurance company to select is yours, of course, so compare costs and services.
If you're not convinced about getting a title insurance you must know that the title insurance provides the following protection:
First of all, it will protect you from fraud and identity theft, in case steals identification is stolen and the perpetrator obtains a mortgage against your property in your name. It will survey or title problems, such as encroachments or setback violations. If the previous owner neglected to pay taxes, the municipality is allowed to put a lien on the property that is now belongs to you. Your title insurance will protect you from these tax arrears. It will cover building permit coverage. Sometimes you may discover that a building permit wasnt issued for certain improvements on the house that you just bought, youre responsible for removing or repairing the addition or renovation. Construction liens. If there is an outstanding amount of money against an addition or renovation, the builder is entitled to put a lien against your property. Because you're the current owner, you are automatically responsible for all the payments, even if the work was done prior to your purchasing the property. Work orders are not normally registered on title, so are easily overlooked. If the problem with the property is discovered between the time you submit transfers of your land and mortgage to the land titles office for registration and the time they are registered, you are still entitled to close the deal on time and not be forced to pay any interest to the seller.
Few important, final tips about title insurance: Make sure to check to see that all the title policy amounts are correct. Ensure that you check the effective date that was given on the policy to see if it matches the actual closing date of the escrow. You need to verify that the policy describes all of the property and all of the interests that are being acquired. Make sure that you ask the escrow or title officer about potential discounts as discounts are often available for first time buyers and others with special circumstances. If the insurer is providing both you and a lender's title policy in the same transaction concurrent rates may be available - check with your closing agent. Additionally, discount rates are often available in bulk rates for new subdivisions. If you're purchasing a house that is a part of new subdivision make sure that you check with your escrow or title officer for specific information. Finally, refinancing discounts and short-term financing rates may be available. Discuss discounts with your escrow or title officer as well.
