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Protect Your Title

Title insurance offers protection against loss from defects in title  to real property (forgeries, encroachments, dower claims, etc.); and from the invalidity or unenforceability of mortgage liens. The following discussion is for general information, you should consult with your attorney concerning specific legal questions regarding Title Insurance.

It is meant to protect an owner's or lender's financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.

Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate. Just as lenders require fire insurance and other types of insurance coverage to protect their investment, nearly all institutional lenders also require title insurance to protect their interest in the collateral of loans secured by real estate. Some mortgage lenders, especially non-institutional lenders, may not require title insurance.

Here's a real life example of how title insurance can come to the rescue. You have just purchased a home in a new development and decide to put a big swimming pool in your back yard. While digging the hole, your contractor breaks through a municipal sewer line that just happens to run through and under your back yard. If the easement for the sewer line was recorded but was not disclosed on your title insurance owner's policy, the title insurer is liable for damages (either the cost of moving the sewer or the lessened value of your home and property).

Owner's policy
The owner's policy insures a purchaser that the title to the property:

1. Is vested in that purchaser and that it is free from all defects, liens and encumbrances except those which are listed as exceptions in the policy or are excluded from the scope of the policy's coverage.
    
2. It also covers losses and damages suffered if the title is unmarketable
    
3. The policy also provides coverage for loss if there is no right of access to the land.
    
4. expanded forms of residential owner's policy exist that cover additional items of loss.

The liability limit of the owner's policy is typically the purchase price paid for the property. As with other types of insurance, coverages can also be added or deleted with an endorsement. There are many forms of standard endorsements to cover a variety of common issues.

The premium for the policy may be paid by the seller or buyer as the parties agree; usually there is a custom in a particular state or county on this matter which is reflected in most local real estate contracts. Consumers should inquire about the cost of title insurance before signing a real estate contract which provide that they pay for title charges.

RE/MAX Valley Real Estate  can provide you detailed information as to the cost of title search and insurance before the real estate contract is signed. Title insurance coverage lasts as long as the insured retains an interest in the land insured and there is no additional premium paid after the policy is issued.

Lender's policy
This is sometimes called a loan policy and it is issued only to mortgage lenders. Generally speaking, it follows the assignment of the mortgage loan, meaning that the policy benefits the purchaser of the loan if the loan is sold. For this reason, these policies greatly facilitate the sale of mortgages into the secondary market. That market is made up of high volume purchasers such as Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac) as well as private institutions.

The American Land Title Association ("ALTA") forms are almost universally used in the country though they have been modified in some states. In general, the basic elements of insurance they provide to the lender cover losses from:

1. The title to the property on which the mortgage is being made is either
   1. Not vested in name of the mortgage loan borrower,
   2. Subject to defects, liens or encumbrances,
   3. Unmarketable.
       
2. There is no right of access to the land.
    
3. The lien created by the mortgage:
   1. Is invalid or unenforceable.
   2. Is not first in line to any other lien existing on the property on the date the policy is written.
   3. Is shown to be subject to undisclosed mechanic's liens under certain circumstances.
       
4. Covers the cost of defending insured interests against attack.

1 and 2 above are important to the lender if the lender must foreclose its mortgage. Item 3 covers matters that would jeopardize recovering full value of the foreclosed property in the resale.