Frequently Asked Questions about Title Insurance
1. What is Title Insurance?
Most kinds of insurance are self-explanatory. Fire insurance protects against losses from fire. Collision insurance guards against the cost of a dented, damaged car. But what does it mean to insure your title to real estate?
Real estate has always been considered a 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 which stand on the land; You should realize whenever you buy property that 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 you are going to buy. These may be governmental bodies, utility companies, contractors who performed work on the property, or other individuals who have perfectly proper unpaid claims against the property.
Anyone who has such a claim is, in a sense, a 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 a claim at the time you buy. It doesn't matter. Such claims may remain attached to the real estate you have purchased.
2. Why do I need Title Insurance?
Title Insurance protects the equity in your home. For a low one-time premium your home will be protected against hidden risks or undiscovered interests, such as liens, claims or encumbrances.
Owning real estate is one of the most precious values of freedom. When you buy a home, you want to be sure the property is properly conveyed and free from unexpected adverse interests.
Once purchased, title insurance remains in effect for as long as you own your home, adding security and peace of mind to home ownership.
3. Will you get a clear title?
It is of the greatest importance that you do. But this means that you must be informed about any of these claims against the property so that you can make certain they are cleared up before you buy.
And it means that you must be protected against any undiscovered claims that may arise in the future to threaten your title and the possession of your property. Title insurance provides this twofold protection.
4. How do you learn what claims there are against the property?
By a search of the public records. This is the first step a title insurance company takes in order to insure your title. Title insurance companies maintain "plants"; that is, giant databases of title records, in many cases dating back over a hundred years.
Each day, recorded documents affecting real property and property owners are posted to these title plants. In this way, title insurance companies keep track of every entry on public record which might affect every parcel of land.
One of the first tasks that will performed is a title search. Some of the things a title search uncovers are any unpaid taxes or mortgages, judgments against previous owners, easements, and many other court actions or recorded documents which affect title to real estate.
The title insurance company will perform the search and report their findings in the preliminary title report.
The seller, and real estate agent can then work together with the title insurance company in resolving any title claims showing in the preliminary report.
5. But what if there is a defect in the title which doesn't show up in the public records?
This can happen. Title insurance companies call them "hidden risks" - the undiscovered claims which may arise long after you have purchased your home.
While the goal of every title insurance company is to conduct such a thorough search and evaluation of public records that no claim will ever arise, protection against loss from claims on real estate which cannot be discovered by examination of the public records is the second part of the twofold protection that title insurance provides.
These hidden risks might be forgery, confusion due to similar names, or an error in the records.
If a claim is made against your title as the insured, your title insurance company will protect you by defending your title, in court, if necessary; and your title insurance company will bear the cost of settling the claim, if it proves valid, in order to perfect your title and keep you in possession of your property.
6. What is a re-issue credit?
Re-issue credit is a discount offered to parties that can prove that a prior title insurance policy existed on the real estate being insured. Because it was previously insured there is less risk to the insurance company an a lower rate applies. This credit could save you up to 40% on the cost of title insurance. (see credit calculations)
7. How can you get a re-issue credit?
In order to receive a re-issue credit for Title Insurance, a copy of the prior title policy issued in their name of the seller, or borrower on a refinance transaction, must be submitted and one of the following conditions must apply:
a) Policies on real property which is unimproved except for roads, bridges, drainage facilities and utilities where the current owner's title has been insured prior to the application for a new policy, or
B) Policies issued with an effective date of less than three (3) years after the effective date of the policy insuring the seller or mortgagor in the current transaction, or
c) Loan policies issued on refinancing of property insured by an original owner's policy which insured the title of the current mortgagor.
Any amount of new insurance, in the aggregrate, in excess of the amount under the previous policy shall be computed at Original Rates.
8. Who pays for title insurance?
The answer to this question lies within the sales contract. All terms and conditions of any contract are subject to negotiation until accepted.
Customarily it is the seller's responsibility in Broward and Miami-Dade Counties to pay for the title search only, and the buyer is responsible for the owner's policy.
In Palm Beach County it is usually the seller's responsibility to pay for the title search and the owner's policy.