Title Insurance -
What is Title Insurance?
For the property owner, it is a guarantee that they own the property free and clear of any liens, other than the ones they agreed to when they purchased the property. This protection, or promise, lasts as long as the insured party owns the property.
For the lender, it is a guarantee that it has a valid and enforceable lien (loan or deed of trust) secured by the property, and that no one else other than those listed on the policy has a prior claim (or loan, etc.). This protection remains in effect as long as the loan remains unpaid.
Title Insurance: To a home-buyer, the term is probably familiar - but is it understood?
Where Does Your Dollar Go?
What is your dollar actually paying for when you purchase a title policy?
Title Insurers, unlike property or casualty insurance companies, operate under the theory of risk elimination. Title companies spend a high percentage of their operating income each year collecting, storing, maintaining and analyzing official records for information that affects title to real property. Their technical experts are trained to identify the rights others may have in the property, such as recorded liens, legal actions, disputed interests, rights of way or other encumbrances on your title. They will also identify what utility companies, if any, have a right to use a portion of the property for phone, gas, electrical or water lines, (known as easements), what a homeowner is and is not allowed to do with the property by reason of certain Conditions, Covenants and Restrictions (CC & R's) and if anyone else has a possible interest in the property.
Before closing your transaction, the title company and escrow company will proceed to "clear" those liens or encumbrances, which the buyer does not wish to assume.
The goal of title companies is to conduct such a thorough search and evaluation of public records that no claims will ever arise. Of course, this is difficult as - we live in an imperfect world, where human’s error and changing legal interpretations make 100 percent risk elimination impossible. When claims arise, professional claims personnel are assigned to handle them according to the terms of the title insurance policy.
