It still astonishes me how many people spend thousands of dollars on title insurance when they purchase or refinance a home, but have no idea what title insurance is. So let’s give the people a comparison of what they know. When people think of insurance, they think of car insurance, health or life insurance, not title insurance. Car, life, and health are all insurances that cover a future event. People are paying multiple premiums in the event of a future car crash, death, or doctor’s visit. Please notice the words future event and paying multiple unregulated premiums. Title insurance is in a way, the opposite of these insurances. Foremost, we need to understand that there are two title insurance policies, and most importantly, it is YOUR DECISION as the buyer on which title company you want to work with. This week we will discuss the owner’s policy.
An Owner’s Title Policy insures the past history of the land and is a one-time, price regulated premium payment paid at closing. Please note the words Past, One-Time and Price Regulated. Simply stated, “title” is the right of ownership in property. When a person holds the Title to property, it simply means they have proper and legal ownership. Title insurance protects your investment by shielding you from any claims against your title in the property purchased. Title Insurance is an insurance policy guaranteeing that the title to property is clear, and that the owner has the right to sell the property. Accordingly, once a title insurance policy is issued, your interest in the property purchased is protected, subject to the exclusions and conditions contained in the policy. Should a problem later arise with the title, we will protect you in any litigation that may ensue, including paying costs, attorneys’ fees, and expenses. If the claim is ultimately proven to be valid, we will also pay the costs of your claim, up to the amount of the policy, or will perfect the title as insured, at its own expense. Blah Blah Blah, let’s give a real life example already!!!!
This story just came up the other day. Buyers purchased their home and they had a terrible run in with a title company that was not doing their due diligence on clearing title. The title company is supposed to order what is called a “run down” search the day before closing to see if any liens or judgments were recorded in the county during the time of the original search and the date of closing (average time lapse of 30-90 days from original search to closing). The seller’s took out a home equity loan after the original search and before closing, so it was not picked up in the original search. So $150,000.00 later and after closing, that lien was now the responsibility of the home buyers because it was never caught until they refinanced a couple years down the road. Even worse, the seller’s continued to draw from the line of credit and ran it up to the full $150k amount. The buyers (current home owners) then had to file a claim with the title company that has now gone out of business. Guess who else was never found? Yup, you got it right, the sellers! They took off and managed to steal $150k without anyone knowing for years! Oh, I am just getting started, please look out for next week’s blog for more on why title insurance is so important to have, and why it is even more important that you pick your own title company! Next week we will dive deeper and discuss the lender’s policy and the ongoing question of “I just got title insurance a year ago when I purchased, why do I need it again when I am refinancing only one year later?!”
- Luke Tyler, President and CEO