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Title Insurance & Your Home Purchase
The purchase of a home may well prove to be the largest financial investment you make in your lifetime. Therefore, the importance of fully protecting such an
investment cannot be overstated. When you sign a contract to purchase a home and apply for a mortgage, your lender is going to require title insurance.
When a title company receives an application for title insurance, their initial area of responsibility is to abstract the public land records in order to examine
information surrounding the title to the property being purchased. This title investigation or search is referred to as the "Chain of Title". The "Chain of Title" will reveal the
following:
- That the contract seller of the property is, in fact, the legal owner and that all owners are parties to the contract.
- That the "estate" or degree of title which you have agreed to purchase is currently and accurately vested in the seller.
- The presence of open mortgages, judgments or similar liens which much be satisfied before a "clear" tittle can be conveyed to you.
- Existing restrictions, easements, or rights of way for roads, public utilities, etc., which may limit your right to use of property, or grant rights to others
who are not owners.
- The status of property taxes and other public or private assessments.
Once this investigation or title search is complete, the information is supplied to your lender and attorney in the form of a commitment for title insurance.
During the final settlement or closing stage of your purchase, the title company will work very closely with your lender and attorney. Acting in its fiduciary
capacity the title company will often handle the transfer of all appropriate funds between buyer, seller, lender and all other interested parties. After closing, the Owner's Title Insurance
Policy is issued and will protect you against hidden defects such as fraud, forgery, incompetency or similar matters which are not revealed by the public records.
The real estate contract most frequently used in this area calls for the home seller to provide you with "merchantable title". This means among other things
that you should be provided with an "Owner's Title Insurance Policy" at the seller's expense. You as a buyer, will pay only a minimal one time fee for the lender's mortgage policy.
Your REALTOR®, in conjunction with the title company now has the ability to have a title insurance commitment
produced at the time a property is first listed. The benefits for the home buyer and seller are as follows:
THE HOME SELLERS BENEFITS BY:
- Fulfilling their contractual obligation by providing merchantable title.
- Having an early an opportunity to reduce their title insurance fees.
- Having an early warning of any possible title related problems which can be cleared by their counsel.
- Reducing delays in their real estate closing.
- Having the maximum flexibility and convenience in selecting the time and place of closing.
THE HOME BUYERS BENEFIT BY:
- Being able to provide the lender with the required title commitment when first applying for their loan.
- Having a title commitment which contains the property's legal description, a requirement of the lender for the preparation of their documents. This will
reduce delays with the lender.
- Giving their attorney immediate knowledge of any major defects to the title which must be cleared.
- Maximum closing flexibility.
This Listing Commitment Program carries no cost until the final real estate closing and title to the property is transferred from the seller to the buyer.
This article is designed to give a general overview of the role of the title company in real estate transactions. It does not
attempt to answer all questions which could arise, as such questions are unique to each transaction, but is presented in the hope of educating the home buying public as to the intricate role played
by the title insurance company.
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