Why Do I Need Title Insurance? Buying a new home is one of life's most gratifying experiences. As you approach the big day of closing, however, all the details can be a little overwhelming. You might easily overlook the single most important step in the entire process -- the purchase of Title Insurance on the wonderful new home of yours. What is a Title? A title is the evidence, of right, that a person has to the ownership and possession of land. It is possible that someone other than the owner has a legal right to the property. If that right can be established, this person can claim the property outright or make demands on the owner as to its use. Do I need Title Insurance? Most definitely! Title insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim. What can make a Title Defective? Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These hidden "defects" are dangerous indeed because you may not learn of them for many months or years. Yet they could force you to spend substantial sums on a legal defense, and still result in the loss of your property. But the lender already requires Title Insurance, won't that protect me? Not necessarily. There are two types of Title Insurance. Your lender likely will require that you purchase a Lender's Policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it. An Owner's Policy on the other hand is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner's title policy covers the full cost of any legal defense of your title.
How much does Title Insurance cost? The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you or your heirs own the property. When should I look into purchasing Title Insurance? Call Team Title USA, LLC as soon as you and the seller sign the earnest money contract. With a brief summary of the details, our team of title experts will begin a search of the public records and issue a title commitment. Because there are a number of steps we must take to make certain that we know all we can about the title, it is wise to get the ball rolling as soon as possible. Should I shop around for the best Title Insurance deal? Some states closely regulate rates. Others permit open competition, often resulting in significant differences between title insurers on rates and coverage. Depending where you live, it pays to investigate your options carefully in order to obtain the most complete coverage. Can my title company handle the closing? Yes, in the entire state of Florida. Team Title USA, LLC acts as a central clearinghouse for the parties involved -- collecting necessary documents, insuring adherence to the lender's title instructions, making arrangements for proper payment and distribution of funds. We are fully prepared to work with you from the beginning of your transaction all the way through to conclusion. What items are needed at closing? You will want to have these items complete or in hand when you come to the closing (please confirm with your escrow officer, as practices vary by state): Buyer • Buyer's copy of purchase agreement • Cashier's check(s) to make all payments • Proof of purchase of insurance for fire, casualty, etc. • Invoices for any unpaid taxes, utilities or assessments • Photo identification (passport, driver's license, or state-issued identification card) Seller • Seller's copy of purchase agreement • Invoices for any unpaid taxes, utilities, assessments, and latest utilities meter readings • Receipts for last payment of interest on mortgages • Bill of Sale of personal property covered by the purchase agreement • Any unrecorded instruments that affect the title • Proof of satisfaction of any mechanics' liens, chattel mortgages, judgments, or mortgages that were paid prior to the closing • Photo identification (passport, driver's license, or state-issued identification card)
The job of searching the public records to identify existing rights and interests is not an easy task. The title searcher or abstracter reviews the public records to find all aspects of title, which can be seen and recognized. From the title search, the title examiner produces an opinion of title, from which the Company will issue its insurance. In many areas, the title to a property can be traced back to a royal grant, charter, or the United States government. In many areas, titles are not traced back that far; instead, local custom or title insurance company requirements dictate a shorter search.
There are few titles, if any that have a perfect history from their source, or root, to the present day. Each transfer of ownership is a "link" in what is referred to as the "chain of title." As each transaction or link takes place, there is a potential for a problem. Even if the entire chain of title appears to be in order, the chain is still subject to interpretation. When searching a title, what we are trying to determine are the various rights and interests that make up each link in the chain as it has passed from one owner to another.
A "title" is composed of three basic elements. 1. Rights and interests that are disclosed in the public records or by physical inspection of the property, i.e., deeds, mortgages, leases, etc., parties in possession, utility easements, etc. 2. Rights and interests that are not recorded but exist, i.e., limitations imposed by laws and statutes, etc. 3. Rights and interests that are hidden, i.e., forgeries, secret marriages and unknown heirs.
Every title is made up of many different "rights" and "interests" that may be owned by different people. The "owners" of the property own the most valuable of the property’s rights and interests, but other people may also have rights to the property, such as easements for utilities or mortgages, etc. Each title can be compared to sticks in a bundle. The rights and interests are represented by the sticks. The "owners" own what we call a "fee simple" title, that is, they have purchased the most vital and valuable sticks including rights of possession, use, occupancy, enjoyment, inheritance, etc. Also, within the bundle are sticks that may be owned by other parties. These are called encumbrances and may consist of easements, mortgages, liens, etc.
When a person purchases a parcel of real estate, it is not only the physical property itself that he or she acquires, but the sellers rights and interests, "the seller’s title," in the property. It is essential for the prospective purchaser to know before the transaction takes place, precisely what rights or interests the seller can convey. The purchaser also needs to know who else may have rights or interest in the property, and about any encumbrances against the property that may affect the use or enjoyment of the land. The title search must cover all these rights and interests. There are few business transactions with more importance than those related to the sale and purchase of real estate. The purchase of a home is usually the largest, single expenditure most families will ever make. To these families, we at Team Title USA, LLC play a critical role in the real estate transaction.
In most cases, a property owner will approach a real estate agent and offer a property for sale. The agent will then advertise the property and conduct a search for potential buyers. Generally, a number of potential buyers will respond to the agent’s listing, depending upon real estate market conditions and general economic conditions at the time. The agent, working with the client, then determines which of the potential buyers is financially qualified to enter into sale price negotiations with the property owner.
Once a qualified buyer is found and a sale of property is arranged for and completed, the agent is compensated in the form of a commission. This commission is normally paid by the property seller and is based on a percentage of the final sale price of the property. The actual dollar amount of the commission, as well as the general terms of the agent’s services, are specified in a listing contract or listing agreement. Once the buyer and seller have agreed on a purchase price, they enter into a Purchase Agreement or Contract. The contract sets out the terms of the agreement such as price, closing date, contingencies, etc. It is recommended that the parties have the advice of their lawyers before signing the Contract, since once it is executed it defines the terms of the sale. The parties’ attorneys will continue to provide legal advice to their respective clients until the real estate transaction is completed.
Most people do not have enough cash to purchase property on an all-cash basis and must therefore look toward one of the many sources of financing available today. The basic arrangement is that someone will lend the buyer enough money to purchase the property under certain conditions. The conditions require the purchaser to repay the monies according to a known repayment schedule, and pledge the property as security for the debt. When you borrow money, the lender is in fact making an investment in which the lender will earn interest. Your payments will usually be made on a monthly basis and are calculated so that the entire amount of principal and interest due is repaid in a fixed number of years. If the entire debt will not be paid in this time (i.e., fully "amortized") the total amount left to be paid is called a "balloon" payment. The lender first processes and underwrites the buyer’s application. This involves ordering credit reports, appraisals, verifications of salary, verification of debts, and possible investor and private mortgage insurance company approval. When loan approval appears likely, title insurance is ordered, often by the real estate agent.
The Benefits of Title Insurance Title insurance issued by Team Title USA, LLC provides a broad range of benefits to the parties involved in a real estate transaction. To the Purchaser of Real Estate... The purchaser of real estate needs protection against serious financial loss due to a defect in the title to the property purchased. For a single, one-time premium, which is a modest amount in relationship to the value of the property, a buyer can receive the protection of a title insurance policy – a policy that is backed by the reserves and solvency of the Company. A title insurance policy will cover both claims arising out of title problems that could have been discovered in the public records, and those so-called "non-record" defects that could not be discovered in the record, even with the most complete search. A title insurance policy will not only protect the insured owner, but also that person’s heirs for as long as they hold title to the property, and even after they sell by warranty deed. The Company will not only satisfy any valid claim made against the insured’s title, but it will pay for the costs and legal expenses of defending against a title claim. To the Lender… The overwhelming majority of mortgage loans made in the United States are made by persons who are acting in a fiduciary capacity – by savings and loan associations, savings banks, and commercial banks on behalf of their depositors, and by life insurance companies on behalf of their policyholders. Because they are lending other people’s money (other people’s savings or policyholder’s funds) these lenders must be concerned with the safety of their mortgage investments. A policy of title insurance provides a mortgage lender with a high degree of safety against the loss of security as a result of a title problem. This protection remains in effect for as long as the mortgage remains unsatisfied. Team Title USA, LLC also provides lenders with in-depth expertise on a wide variety of title related matters to facilitate the mortgage loan process. To the Seller… An owner of real property whose interest is insured by an owner’s title insurance policy has the assurance that the title will be marketable when selling the property. The title insurance policy protects the seller from financial damage if the seller’s title is rejected by a prospective purchaser. Also, when the seller conveys with "warranties," the seller is still protected if the buyer sues because of a breach of those warranties. To the Real Estate Attorney… Title insurance enables the real estate attorney to provide the client with substantially greater protection than would be afforded by the attorney’s opinion alone. The attorney’s opinion is generally limited to recorded matters and the client can only recover from the attorney if the attorney is found to be negligent. (Remember the case of Watson v. Muirhead that prompted the creation of title insurance?) To the Real Estate Broker… The title insurance company and the real estate agent both seek to ensure that as many purchases as possible are closed to the satisfaction of all the principals in the transaction. From the broker’s standpoint, the efficient and safe transfer of title will result in client satisfaction, increased prestige, and continued business. Apart from the security that title insurance offers, most brokers have experienced numerous instances in which title insurance personnel have enabled them to close transactions that otherwise would have been delayed. By helping to avoid delays, Team Title USA, LLC is able to facilitate the job of the real estate broker and to minimize the inconveniences and costs to the homebuyer. To the Home Builder… By providing various title insurance services and information to the home builder, the title insurance industry can and does assist the builder in identifying and evaluating building and use restrictions, easements, etc., in removing title problems that may arise, and in facilitating prompt and needed disbursement of construction funds from the construction lender. All of these services ultimately rebound to the benefit of the buyers of newly constructed homes. To the Community In General… Apart from the unique benefits title insurance offers to particular parties interested in a real estate transaction, title insurance companies can and do offer considerable assistance to public officials through the use of their "title plants" – the data banks of reorganized and indexed public records that are maintained by the Company in many areas of the country. Much of the information contained in title plants is not readily available from other sources. This fund of information about the date of recent sales, representative sale prices, ownerships, area maps, use restrictions, surrounding properties, and a host of other matters pertinent to proposed projects, has helped representatives from all levels of government save countless hours and taxpayer dollars. In addition, title plant people frequently help recording officers correct errors they discover in public indices and records.