Title Insurance 101

Title insurance is your policy of protection against the loss if a claim is made against your ownership because of fraud, forgery, judgments, unpaid real property taxes, liens, or other defects in title. If you're buying a piece of property, you want to make sure you really own it when the transaction is complete. If you're a lender, you want to make sure your mortgage is, in fact a valid lien. Title insurers carefully examine the history of the property's title and issue a policy that protects the interested parties against the potential of loss from title defects. The title insurance company will, at its own expense, defend the title and will pay losses within the coverage of the policy if they occur.

A title is the foundation of property ownership. It is the owners right to possess and use the property. The party to whom ownership was granted in the most recently recorded deed is said to be "in title".

The most accurate description of a title is a bundle of rights in real property. Being "in title" means that you have a legal right to possess that property and to use it within the restrictions imposed by authorities or limitations on its use imposed on the basic right to possession by previous owners. Title insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.

A title search is a detailed examination of the public records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller's right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property. Many companies search the "chain" of title back 40 years or more. One in four title searches finds a title problem that is fixed before the insurance is issued. Title companies fix the problems then issue the title insurance. Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after closing.

A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes and special assessments, unsatisfied mortgages, mechanic’s liens, lawsuits, judgments against the seller and easements and restrictions limiting the use of the land. A search will also reveal whether the seller is in title and has the legal right to sell.

Yes. There are some "hidden hazards" that even the most diligent title search may never reveal. For example: Statements in the record may be incorrect or may fail to give important facts. There may be fraudulent or improperly executed documents on the record. Facts revealed in the abstract may be interpreted incorrectly. And there may even be ordinary clerical mistakes which could seriously endanger the title. Even after all these possible hazards are eliminated, there still remain some of the most serious sources of risk, hazards which by their very nature simply cannot be uncovered. Some of the most serious risks which are not revealed by the records or by an examination of the abstract include: marital status of the owner incorrectly given, undisclosed heirs, mental incompetence of grantors of deeds, transfer of title by minors, fraud and forgery, defective deeds, and confusion due to similar or identical names.

That depends on the claim. In an extreme case, you could lose your entire home and property and still be liable to pay off the balance of your mortgage. Most claims aren't that dramatic, but even the smallest claim can cost you time, money and aggravation, and you may have to pay costs for a legal defense.

Yes, with an owner’s title insurance policy. Under the terms of the policy, you are protected against risks and insured against loss. If your title as insured is ever attacked, your policy protects you in two ways: 1. If it is necessary to enter a legal defense of your rights under the policy in any suit or proceeding adversely affecting the title as insured, legal counsel is employed to take such action for you. This is done completely at the insurance company's expense. 2. If a loss is sustained, you are protected up to the full amount of your policy, which usually is equal to the full purchase price you paid for the property.

First understand there are basically two different levels of coverage: Standard coverage, and our comprehensive "Homeowner's Coverage" coverage. Standard coverage typically handles such risks as: Errors or omissions by county officials or their employees in maintenance of public records. Clerical errors in public records. Errors in recording legal documents. Errors or omissions by employees of the company in the process of examining and insuring the title to the real estate described in the policy. Missing or undisclosed heirs as a result of incomplete or wrongful or non-existent probate court records in the chain of title. Dower of spouses of owners in the chain of title whose interests were not disclosed in the public record, or the release of which was not properly secured. Invalidity or impropriety of judicial actions in matters affecting the transfer of title or ownership of the real estate described. Deeds of record obtained by fraud. Deed never delivered, but appears of record. Deeds and mortgages made by minors or persons of who are mentally incompetent. Deeds of record which may be ineffective because delivered after the death of grantor or grantee, or without the consent of grantor. Forged deeds and other documents. Forged mortgages, releases, waivers, assignments and cancellations of mortgages and mortgages cancelled by mistake. Divorce proceedings outside of the county in which property is located. Bankruptcy proceedings had in a foreign county. Missing dower interests in title by reason of deeds by persons representing themselves as single, but who are actually married. Birth or adoption of children after date of Will. Wills not probated, or wills probated after deed is executed and delivered by heirs. Falsification of records. Lack of right of access. False impersonation of the true owner. Confusion caused by similar names. Invalid documents executed under an expired power-of-attorney. Fraud. Invalid divorces. Unpaid child support lien. Unpaid taxes (local, state, federal). Unrecorded easements (rights of way).America's Title "Homeowner's Policy" covers all of the risks listed above, plus additional coverages which other insurance companies have not historically provided: Post-policy forgery. Post-policy cloud on title. Post-policy adverse possession. Post-policy easement by prescription. Forced removal of improvements due to lack of building permit (subject to deductible).Post-policy construction of improvements by a neighbor onto insured land. Location and dimensions of insured land (survey not required).Pre-existing violations of subdivision laws, zoning ordinances or CC&R’s (Covenants, Conditions & Restrictions).Inflation protection. Subdivision Map Act Coverage. Map Inconsistencies. Enhanced Access. Please refer to your policy for specifics about the coverages your owner’s policy includes.

You notify the title insurance company and they defend the title, even if it goes to court. The title company bears all expenses.

Because the owner could, in a very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. He may have made improvements that could result in a mechanic’s lien being placed against the property. It is necessary to conduct an up-to-date title search to uncover any such problems.

If anything should happen to defeat the title, your cause of action would be against the seller, and his ability to pay. Attorney's fees and expenses would not be covered.

Not necessarily. A deed is just a document by which the right of ownership in land is transferred, whatever that right may be. It's not proof of ownership, and it doesn't do away with rights others may have in the property. In addition, a deed won't show you liens or claims that may be outstanding against the title.

An attorney's opinion is based on a search of the public records. So, once again, even the most exhaustive search of these records may not reveal everything. Unlike a title insurance company, an attorney is not liable if you should suffer loss because of "hidden hazards" in the title.

Construction of a new home raises special title problems for the lender and owner. You may think you are the first owner when constructing a home on a purchased lot. However, there were most likely many prior owners of the unimproved land. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased. In addition, builders routinely fail to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property. Again, lenders want to be sure the property has clear title, and they are insuring the correct property. Purchasing owner's title insurance will protect you against these potential problems and pay for any legal fees involved in defending a claim.

When you refinance you are obtaining a new loan, even if you stay with your original lender. Your lender will require Lender's title insurance to protect their investment in the property. Even if you recently purchased or refinanced your home, there are some problems that could arise with the title. For instance, you might have incurred a mechanics lien from a contractor who claims he has not been paid. Or you might have a judgment placed on your house due to unpaid taxes, homeowner dues, or child support. The lender needs reassurance that the title to the property they are financing is clear. You will not need to purchase a new Owner's title policy; the one you bought at the original closing is good for as long as you and your heirs have an interest in the property. If it has been no more than 10 years since you bought your house, ask for a reissue rate when you refinance.

Any person or financial institution that lends money on real estate wants that investment protected. Mortgage title insurance assures the lender that the mortgage is a valid first lien protected against hidden as well as known defects in the title as insured. Most lenders require this type of insurance, and typically require the borrower to pay for it. This policy only protects the lender's interest. It does not protect you. The lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of a claim there is no provision for payment of legal expenses for anyone other than the lender. If some matter arises affecting the past ownership of the property, the title insurance company would only defend and protect the interest of the lender. You would have to assume the financial burden of your own legal defense. If your defense is not successful, the result could be a total loss of title. An Owner's Policy, on the other hand, is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner's title policy covers the full cost of any legal defense of your title. When a loan policy is being issued, the small additional expense of an owner's policy is a bargain.

The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, and then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property.

As opposed to other types of insurance, the premium for a title policy is paid at the time the policy is issued and is good for the life of the policy. The premium for an owner’s policy is based on the sale price. For a loan policy it is based on the amount of the loan insured. The premium is paid only once; it is not paid on an annual basis.

In Ohio, title insurance premiums are filed with and regulated by the Ohio Department of Insurance who regulates the activities of title insurers. Rates are fixed and the same department establishes the forms used. The amount and type of coverage provided determine title insurance premiums. Unlike other insurance premiums, the title insurance premium is paid only once, as the policy is effective for so long as title or "ownership" remains in the name of the insured or his/its heirs or devises/assigns/successors.

An owner's title policy insures you for as long as you and your heirs remain in ownership, or have a liability by virtue of warranties to title given by you to a purchaser. A Lender's title policy protects the lender until the loan is paid off. The premium is paid only once.

The escrow agent is an impartial third party who makes sure every detail of the purchase agreement is carried out -- that the deed files on time, that every penny is accounted for and disbursed appropriately, that the title work is complete, that the lender’s documents are executed correctly and returned in a timely fashion, that everybody's treated fairly. The escrow agent is also responsible for gathering information from many sources to create the final Settlement Statement such as payoff information, tax information, deed preparation and commission amounts.

No. They are different ways to accomplish the same thing, though. Of the 88 counties in Ohio, fewer than 10 of them (mostly in the northeastern part of the state) do escrow closings as the standard method of doing business. The rest do roundtable closings. In a roundtable, all parties to the transaction meet at the closer's office at a designated time. Buyers, sellers, real estate agents, lenders, and attorneys all gather to sign papers, deliver checks, answer final questions, review documents, and hand over keys. In an escrow closing, much of this is handled via the mail, and/or through individual face-to-face sessions. The buyer might sign papers on Tuesday, the seller on Wednesday.

What party pays for which fees is usually spelled out in your purchase agreement. If the purchase agreement is silent about any cost, we rely on local custom. In most parts of Ohio the seller is responsible for: The real estate agents’ commissions, Title search or examination, Deed preparation, Owner’s title insurance policy and binder, A portion of the settlement fee, Conveyance fees to the county auditor, Courier fees to payoff any mortgages or liens, and a home owner’s warranty. The seller will also give a credit to the buyer for prorated taxes. The buyer typically pays for: Any loan or lender related fees, Prepaid escrow items including interest, insurance and taxes, A portion of the settlement fee, The Lender’s title insurance policy and binder, Recording fees, Property inspection fees.

You will want to have these items complete or in hand when you come to the closing (please confirm with your escrow agent prior to closing): Buyer/Borrower: Wire Transfer or Cashier's check for amount needed to close, Proof of purchase of insurance for fire, casualty, etc. (This is usually required prior to closing), Photo identification (passport, driver's license, or state-issued identification card). Seller: Photo identification (passport, driver's license, or state-issued identification card), VOID check or wire transfer information.

Yes, you can. Many people have used this as an effective tax or estate planning vehicle. But be careful, it can be more trouble than it is worth. If you decide to sell, since minors lack the capacity to enter legal agreements, a guardian must be appointed by the court. The guardian could be one or both parents, or a third party appointed by the court called guardian ad litem. The court gives to this guardian the authority and responsibility to look after the minor's best interests. Always consult your attorney, tax advisor or professional estate planner before you transfer real estate to a minor.

Ohio is known as a "dower" state. This means your spouse has a legal interest in any property you own, whether you spouse is in title or not. Your spouse will be required to "release dower" at closing when you sell or finance your property. Dower is effectively released when your spouse signs the mortgage or deed and several other disclosure documents.