Title insurance protects your title to real estate. But what are the risks that make title insurance important?
Real estate has always been considered a person’s most valuable possession. It is so basic a form of wealth that many special laws have been enacted to protect ownership of land and the buildings on the land.
Whenever you buy property, the owner who is selling it to you has extremely strong rights, as do his family and heirs. Also, there may be others in addition to the owner who have “rights” in the property. These may be governmental bodies or contractors, or individuals who have proper unpaid claims against the property.
Anyone who has such claim is in a sense part owner. The property may be sold to you without the party who has a claim knowing about the sale. And you may know nothing about such claim. It doesn’t matter. Such claims may remain attached to the real estate you have purchased.
It is important that you get a clear title when you purchase property. This means that you must be informed about any claims against your land so that you can make certain they are cleared up before you buy. And it means you must be protected against any undiscovered claims that may arise to threaten your title and the possession of your property. Title insurance provides this two-fold protection.
What if there is a defect in the title which doesn’t show up in the public records? This can happen. They are called “hidden risks”, the undiscovered claims which may arise long after you bought your home. Protection against loss from claims on real estate which cannot be discovered by examination of the public records is the second part of the two-fold benefit which title insurance provides.
The title to the home which you have paid for and to which you have received a deed could be seriously threatened or completely lost by such circumstances as forgery, confusion due to similar name, errors in the records, to cite just a few hazards.
If a claim is made against your home and you are insured, title insurance companies will defend your title in court if necessary, completely at their expense. They will also bear the cost of settling the claim if it proves valid in order to protect your title and keep you in possession of your property.
Title insurance is assurance that every possible “cloud” or defect on the title to the land you are buying has been called to your attention so that such defects can be corrected before you buy. And it is insurance that if any undisclosed claim against your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as your insurance policy provides.
The reference, “title company”, implies a purpose of assuring title, but the title company goes further than that. The title company actually handles the closing of the transaction by coordinating all parties - the lender, the buyer and the seller - and assembling all necessary documents and preparing, based on the contract of the parties, the settlement statement (HUD-1).
It also handles all the money involved in the closing. Through all this, the title company’s main function is to provide title insurance to the prospective buyer and any lender financing the purchase.
Title insurers differ from other kinds of insurers in that they attempt to research and “eliminate” all risks of the title defects rather than to “assume” risks. It is the ancillary function of the title company, then, to handle the actual closing to assure that the documents necessary to convey title have been properly executed and filed, and that all previous interest in the property have been disposed.
The title company performs four major functions described as follows:
- Coordinate Working with all the parties, i.e. realtors, lenders, buyers, sellers & other entities of the transaction for a successful closing for all parties.
- Cure The search and examination of titles sufficient to prepare a commitment for title insurance and to cure any issues regarding the title to be able to close the transaction.
- Closing The closing of the transaction is the handling of all documents necessary to effect the transaction and disbursing the funds accordingly as escrow agent.
- Coverage The issuance of the title insurance policies to the buyer and any lender insuring the title as transacted.
Capital National Financial, Inc. enjoys providing exceptional real estate closings by employing experienced, professional escrow officers. We understand that the purchase of a home is stressful, and also one of the most exciting times in your life. We realize we must not only be skillful in the technical aspect of closing, but in the way we handle the needs and concerns of all the parties involved.
We work closely with the real estate community to insure that each real estate transaction is handled in a professional manner for your peace of mind and satisfaction. We are part of your team!