Article
WHAT IS TITLE INSURANCE?
The purchase of real estate is probably the single largest investment you'll make in your lifetime. It is only prudent that you want to safeguard your rights and investment. Title insurance assures that your rights and interests to the property are as expected, that the transfer of ownership is smoothly completed and that you receive protection from future claims against the property. It is the most effective, most accepted and least expensive way to protect your ownership rights.
Because land endures over generations, many people may develop rights and claims to a particular property. The current owner's rights - which often involve family and heirs - may be obscure. There may be other parties (such as government agencies, public utilities, lenders or private contractors) who also have "rights" to the property. These interests limit the "title" of any buyer.
Before your real estate transaction closes, the title company performs an extensive search of all recorded documents related to the property. These records are then examined by experienced title officers to determine their effect on the current status of ownership and a report is issued to you or your agents for review. This thorough examination generally allows any pending title problems to be identified and cleared prior to your purchase of the property.
If title insurance companies work to eliminate risks and prevent losses caused by defects in the title before the closings, why do you need a title insurance policy?
Because even after the most careful research, some title flaws may go undetected. Among the more common flaws to title which are not of record are forgery, invalid court proceedings, mistaken legal interpretations, defective deeds, confusion due to similarity of names, previously unrecognized rights of spouses and undisclosed heirs. These problems may surface at any time in the future.
Protection against these flaws and other claims is provided by the title insurance policy which is issued after your transaction is complete. Two types of policies are routinely issued at this time: an "owners policy" which covers you, the purchaser for the full amount you paid for the property; and a lender's policy which covers the lending institution over the life of the loan. When purchased at the same time, you can obtain a substantial discount in the combined cost of an owner's and a lender's policy. Unlike other forms of insurance, your title insurance policy requires only one moderate premium for a policy to protect you and your heirs for as long as you own the property. There are no renewal premiums or expiration date.
Each policy is a contract of "indemnity". It agrees to assume the responsibility for legal defense of your title for any defect covered under the policy's terms and to reimburse you for actual financial losses up to the policy limits.
Closing Costs..... What They Are
Closing costs or settlement costs are an accumulation of separate charges paid to different entities for the professional services associated with the buying and selling of real estate. Closing costs amount to about 11% of total sales price of an estate.
1. Title Insurance Premium: Fee paid by an individual to insure he has a marketable title or - in the case of a lender - to insure their lien position.
3. Real Estate Commission: Fees paid to real estate company for services rendered in listing, showing, selling as provided for you the listing agreement.
3. Recording Fees. Fees charged by a County Recorder’s officer for recording the documents of a real estate transaction.
4. Loan Fees: Fees charged by a lender in connection with the processing of a new loan. These may include, but are not limited to: points, origination fee, credit report, appraisals and processing.
5. Escrow Fees: Fee charged by a title company and/or escrow company for services rendered in preparing documents necessary in the consummation of a real estate transaction.
6. Additional Charges shown on Settlement. Taxes, homeowners insurance, impounds, and interest prorations; termite inspections, repairs, property inspections, surveys, attorney’s fees per contract and for curative work, if any.