What is title insurance?
When you buy a property, you want to be sure the seller has the right to sell it and that when the transaction closes, you actually own it. A title insurance policy protects you and your lender from losses that could result from disputes over ownership of a property’s title. This could include fraud, liens against the property, or errors missed during a title search. Title insurance is important because it protects you from title hazards that could threaten the investment you have made in your home or other property. It also protects the lender’s investment.
For any purchase or sale that involves an entity such as a corporation, limited liability company, partnership or trust, the authorized signer and the authority for that person must be ascertained. The entity needs to be in good standing in the jurisdiction of its formation.
Why do Buyer and a Lender both need Title Insurance?
Each party needs to have its own title insurance. Usually, the rate, which is set by the state of Florida Insurance Commissioner, is charged at the purchase price and the lender is then given its policy at a nominal cost. The lender can also require additional coverage endorsements which have nominal costs.
Who needs it and Why?
It protects the purchaser and lender from any claims on the title. A lender will not make a loan on a property without it. Usually claims of title defects are not known until well after the purchaser has closed. Before closing, it’s critical to know that your title to the property will be free and clear. This means that, after the closing, it will be free of prior indebtedness or other defects or encumbrances. It its then what is called a “marketable title.”
Normally, at the closing, the seller gives the buyer a deed, which transfers the title to you and warrants your title against claims of other persons. However, you should not accept a deed without having your attorney, or someone approved by your attorney, conduct a through title examination of the property as well as review the deed for legal sufficiency
A title examination involves researching the public records to disclose the previous owners of records, prior deeds, mortgages, court judgments, probate proceedings and divorces, foreclosures, tax and construction liens and other matters that could affect title. In other words, the legal history of the property. In some cases, a title examination will uncover title defects that could jeopardize a buyer’s ability to take clear title to the property.
Should research reveal title defects, the seller may be asked to undertake legal proceedings to clear the defects. Of course, you would want to follow these proceedings closely with your attorney, and make sure that they conform to the requirements of the law.
What is an owner’s policy?
An owner’s title insurance policy guarantees that the buyer has the right to own the property free and clear of liens and claims. It usually covers the cost of any legal fees that arise if you have to defend your claim. The cost is based on the price of the property.
What is an lender’s policy?
A lender’s title insurance policy protects the bank that issues your mortgage from any losses resulting from disputes over who owns the property.
A policy covers the amount of the loan and the cost is based on the amount of that loan. Most lenders require this coverage, which ends when the mortgage is paid.
Do I have to pay a monthly premium for title insurance?
Title insurance is issued for a one-time fee usually due when you are closing or settling the real estate transaction. Insurance benefits are paid only to the name that is on the policy. Coverage lasts as long as you hold title to the property.
What’s covered by title insurance?
Owner’s title insurance protects you from:
- Fraud associated with the title ownership
- Liens existing against the property at the time the policy was issued
- Mistakes in the public record that are not caught before the sale
- Inaccurate or conflicting wills and trusts related to the title
- Missing heirs who suddenly appear and claim to own the property
- Forged or misfiled deeds and other documents
- Errors or flaws in the title that are not discovered during the initial title examination
Lender’s title insurance covers the amount of the mortgage loan and protects the lender’s interest in the property if any of the above risks occur.