A Word About Real Estate
Real estate has traditionally been a family’s most valuable asset. It is a form of wealth that is protected by many laws. These laws have been enacted to protect one’s ownership of real estate and the improvements located on the land. The owner, the owner’s family and the owner’s heirs have rights or claims in and to the property that you are buying. Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the Internal Revenue Service or various other individuals or corporations. The real estate may be sold to you without the knowledge of the party having a right or claim in and to the property. In addition, you may purchase the real estate without having any knowledge of these rights or claims. In either event, these rights or claims remain attached to the title to the property that you are buying until they are extinguished.
The Past Can Determine Your Future
Generally, a person thinks of insurance in terms of the payment of future loss due to the occurrence of some future event. For instance, a party obtains automobile insurance in order to pay future loss occasioned by a future “fender bender” or for the future theft of the car. Title insurance is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., event prior to the acquisition of the property). These risks are far less obvious than those protected against by automobile insurance, but can be just as devastating. The following information will answer some commonly asked questions about title insurance.
It is of utmost importance that you receive clear title to the property when you purchase real estate. In order to do so, you must first be informed of any existing rights or claims that may, in the future, threaten your title and possession to the property. Title insurance provides you with this twofold protection.
In order to determine the status of title, Title Resources conducts a diligent search of the public records for those documents associated with the property. Title Resources then examines those recorded documents in order to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded defects, liens or encumbrances upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens and encumbrances are reported to you prior to your purchase of the property. Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction. In addition, you are protected against any loss or damage resulting from recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the scope of coverage of the particular policy issued in the transaction. This is the first benefit you receive from title insurance.
The title to the property that you have purchased could be seriously threatened or lost completely by hazards which are considered “hidden risks”. Hidden risks are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of those public records. Matters such as forgery, incompetency or incapacity of the parties, fraudulent impersonation and unknown errors in the records are examples of hidden risks which could provide a basis for a claim after you have purchased the property. In order to protect you against this possibility, Fidelity National Title Insurance Company provides insurance coverage for such claims. This is the second benefit you receive from title insurance.
If a claim is made against your insured title, Fidelity National Title Insurance Company protects you by: (1) Defending your title, if necessary; and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.
Unlike other forms of insurance, the original premium is you’re only cost as long as you or your heirs own the property. There are no annual payments to keep your Owner’s Title Insurance Policy in force.
To protect possibly the most important investment you will ever make—the investment in your home or commercial project. With a title insurance policy, you as owner, have an indemnity contract that will reimburse you for loss in the event someone asserts a claim against your property that is covered by the policy.
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.
An important part of title insurance is its emphasis on risk elimination before insuring. This gives you—the policyholder—the best possible chance for avoiding title claim and loss.
Title insuring begins with a search of public land records affecting the real estate concerned. An examination is conducted by the title agent or attorney on behalf of its underwriter to determine whether the property is insurable. The examination of evidence from a search is intended to fully report all “material objections” to the title. Frequently, documents that don’t clearly transfer title are found in the “chain” or history that is assembled from the records in a search. Here are some examples of documents that can present concerns:
- Deeds, wills and trusts that contain improper wording or incorrect names
- Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes
- Easements that allow construction of a road or utility line
- Pending legal action against the property that could affect a purchaser
- Incorrect notary acknowledgements.
Through the search and the examination, title problems are disclosed so they can be corrected whenever possible. However, even the most careful preventative work cannot locate all hidden title hazards.
Here are just a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title:
- False impersonation of the true owner of the property
- Forged deed, releases or will instruments executed under invalid or expired power of attorney
- Undisclosed or missing heirs; mistakes in recording legal documents
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes
Title insurance will pay for defending against any lawsuit attacking your title as insured and will either clear up title problems or pay the insured’s losses. For a one-time premium, an owner’s title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.
In spite of all the expertise and dedication that go into a title search and examination, hidden hazards can emerge after closing, resulting in unpleasant and costly surprises. Some examples of hazards include:
- A forged signature on the deed, which would mean no transfer of ownership to you
- An unknown heir of a previous owner who is claiming ownership of the property
- Instruments executed under an expired or a fabricated power of attorney
- Mistakes in the public records
Title insurance is your last defense to have peace of mind in any title transaction.
The peace of mind in knowing that the investment made is a safe one.