What is a title?
A title is the foundation of property ownership. It is the owner's right to possess and use that property within certain limitations.
What is title insurance?
Title insurance is your policy of protection against loss if a claim is made against your ownership because of fraud, forgery, judgments, unpaid taxes, liens, or other defects in title.
Why is transferring the title to real estate different from transferring title to other items, such as a car?
Because land is permanent and can have many owners over the years, various rights in land may have been acquired by others (such as mineral, air, or utility rights) by the time you come into possession of it. So in order to transfer a clear title to a piece of land, it is first necessary to determine whether and rights are outstanding.
What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller's right to transfer ownership, and to discover and claims, defects, and other rights or burdens on the property.
What kinds of problems can a title search reveal?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Are there any problems that a title search can not reveal?
Yes. There are some 'hidden hazards' that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Other 'hidden hazards' include things like fraud, forgery, defective deeds, mental incompetence, confusion due to similar or identical names, and clerical errors in the records. These defects can arise after you have purchased your home and jeopardize your right to ownership.
How much could I lose if a claim is filed against my property?
That depends on the claim. In an extreme case, you could lose your entire home and property - and still be liable to pay off the balance of your mortgage. Most claims are not that dramatic, but even the smallest claim can cost you time, money, and aggravation, and you will still have to pay costs for a legal defense.
How does title insurance protect my investment if a claim should arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you a legal defense and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
The owner of the property has a deed. Isn't that proof of ownership?
Not necessarily. A deed is just a document by which the right of ownership in land is transferred, whatever that right may be. It is not proof of ownership, and it does not do away with rights others may have in the property. In addition, a deed will not show you the liens or claims that may be outstanding against the title.
Couldn't an abstract show property limitations and restrictions?
Maybe and maybe not. An abstract is a history of the property title as revealed by the public records. Abstracts do not disclose 'hidden hazards' and may contain errors.
What about an attorney's opinion?
An attorney's opinion is based on a search of the public records. So, once again, even the most exhaustive search of those records may not reveal everything. It is also important to remember that an attorney is not liable if you should suffer loss because of 'hidden hazards' in the title.
Are there different types of title insurance?
Yes. Basically there are two different types of policies - a lender's policy and an owner's policy. The lender's policy protects the lender's interest in the property as security for the outstanding balance under the buyer's mortgage. The owner's policy safeguards the buyer's investment or equity in the property up to the face amount of the policy.