UNDERSTANDING TITLE INSURANCE

What is Title Insurnace?

Title insuarance is an insurance policy that provides protection against financial loss resulting from problems in your real estate ownership rights that were unknown to you at the time you purchased the policy. If you are covered by title insurance and a claim arises the title company will either defend the claim or pay you for covered loses up to the policy limits.

What does Title Insurance cover?

Examples of covered matters include:

* Ownership claims by undisclosed or missing heirs. * A title defect arising from an improper foreclosure of the property. * A deed or other document in your chain of title that may be invalid because of fraud or forgery against the rightful owner, invalid power of attorney, a signature given under duress, or signature by a legeally incompetent person. * A deed was signed by only one spouse in a common law marriage. * Undisclosed restrictive covenants affecting your property. * A lien arising because a previous owner failed to pay a mortgage or deed of trust, a judgement, tax, or special assessment or a charge by a homeowners association.

Items normally not covered:

* Defects created after the policy is issued. * Failure to pay your mortgage * Defects you create or have knowledge. * Title insurance not protect against property loss including fire or flood.

Do I need Title Insurance? Only you can make this decision, although in some cases you may not have a choice because your lender may require you to obtain insurance before loaning you money. In other cases Title Insurance will be a negotiable item in a real estate contract. When evaluating whether to purchase Title Insurance, you must consider the possible risks.

What if your home had to be destroyed because it was built over an easement? How would your business be affected if deed restrictions prohibit the use of the property for commercial purposes? Do you have the time and money to litigate a title dispute through the court system, including any appeals? How will your finances be affected if you are unable to sell the property or borrow money against it?

How much does Title Insurance cost?

The basic cost of a policy is a small percentage of the sales price of the property, as shown in the current rate chart. (Additional charges may apply for certain changes to the basic policy that may be requested by you or your lender.)

The Title Insurance premium is a one-time expense that is paid when you purchase the policy, and your policy will provide coverage for as long as you and your heirs own the property.

When do I get Title Insurance?

A property owner can only acquire Title Insurance when closing on the covered property. The Title Insurance must be ordered prior to the closing to allow the title company time to generate the title commitment, and if necessary to allow the parties an opportunity to resolve any problems that might be discovered.

Typically, the issue of whether a buyer will obtain Title Insurance and who will pay the premium is resolved while negotiating the real estate purchase contract.

My lender is making me pay for a mortgagee's policy. Won't that protect me? Not necessarily. A mortgagee's policy only ensures that your lender has a valid, enforceable lien against your property. If a covered title defect arises that the title company cannot fix and you lose your land, a mortgagee's policy will pay money to your lender--not you.

In addition, a mortgagee's policy will not cover matters that do not affect the validity and enforceability of the lien, such as restrictive covenants that limit how you can use your property.

akes a few minutes for a lien to be filed against land. In addition, coverage under the

current owner's policy terminates when he sells the land. So, if you discover a title defect after closing that the

prior owner's title company overlooked neither you nor the prior owner will have a claim.

I've hired a lawyer to review my documents. Is Title Insurance still useful? Yes. An experienced real estate attorney can be helpful in ensuring that your documents are skillfully negotiated and properly drafted, but your lawyer probably will not perform a title examination unless you specifically request it.

Because of the time required to make a diligent search the lawyer's fees for this service may actually be higher than the title insurance premium.

Consider, too, that a reputable national insurance company will likely be in business long after your lawyer has passed away or ceased practicing law.

Does Title Insurance provide any benefit to the seller? Absolutely. First, most buyers (especially when purchasing a home) want Title Insurance, so by offering Title Insurance you make your property more attractive to prospective buyers. Time really is money in real estate sales.

A homeowner who can shave just 30 days off his closing date may well save enough in mortgage interest, taxes, and homeowner's insurance to offset the cost of the Title Insurance premium.