WHAT IS “TITLE”?

In the context of real estate, “title” is the evidence of right that a person (or legal entity) has to the ownership and possession of land. As opposed to other forms of property such as automobiles, boats, airplanes, etc., title is evidenced by a “Deed” recorded with an agency of government.


WHAT IS A TITLE SEARCH OR ABSTRACT?

The title search is a historical trace of the transactions and other records of the subject property for a defined period of time. It consists of a physical search of the public land records of the jurisdiction in which the real property is located. A title search also includes the records of the tax assessor and treasurer for the jurisdiction.


WHAT ARE PUBLIC RECORDS?

The public records consist of (1) records of land transfers made by deed, will or other written instrument, indexed by the names of the parties to the instruments and maintained by date and time in the chronological order that they were recorded, (2) probate records of the Circut Court of the jurisdiction, (3) orders and decrees in all matters and cases adjudicated by that Court, and (4) records of judgments, tax and other liens, takings under condemnation procedures, and other matters that are maintained by the Court pursuant to state law.


WHO OVERSEES THE LAND RECORDS?

The Clerk of the Court is the officer charged with the duty of managing and maintaining the records of the Court.


WHO PERFORMS THE SEARCH?

A title search is performed by an abstractor; a person versed in the purpose of the records and the manner in which they are kept. The abstractor locates and identifies the relevant records and presents them as a written document known as a title search or abstract.


WHAT IS TITLE INSURANCE?

Title Insurance is protection against loss or damage arising or resulting from defects in or the failure of title to a particular parcel of real property, after careful research and examination of public records.


HOW IS TITLE INSURANCE ISSUED?

Title Insurance is purchased using the insurance underwriter or other licensed agency typically in conjunction with the acquisition or pledging of real property.


IS TITLE INSURANCE REGULATED?

Yes, Title Insurance is regulated by state law.


WHAT IS THE TITLE EXAMINATION?

An examination of title is the reading of the records presented by the title searcher in the form of a report or an abstract and is performed as a part of the process of risk elimination and underwriting.


WHO PERFORMS THE TITLE EXAM?

A title examiner, who through education and experience, becomes an expert in interpreting and understanding the instruments and other forms of data contained in the land records.

MYTH:  Title Insurance is unnecessary because it has a very low claims ratio.


FACT:  The title insurance industry is actually structured for low claims loss ratios.  Title insurance is a risk-elimination industry.  In a perfect world, the title examiner would report and the closer could clear up or eliminate all potential title issues (judgments, liens, etc.), prior to closing so that the purchaser obtains a good title.  However, even the most competent title examiner cannot discover more than 20 types of hidden title defects that can adversely affect property title, including missing heirs, forgeries, improper parties to a deed, etc.  Whenever such a challenge arises, title insurance protects the homeowner’s right to that property.


MYTH:  Title Insurance is expensive coverage.


FACT:  Title insurance offers homeowners low-cost protection.  Assume that the one-time title premium on a particular transaction is $1,000.  While that is not an insignificant figure on the HUD-1 settlement statement, it’s more accurate to consider the cost of the premium over the time the property is owned.  In the above example, if a purchaser lives in the property for 10 years, the one-time-only premium’s true cost is only $100 per year.  That inexpensive coverage offers protection of the homeowner’s most valuable asset for as long as the property is owned and protection forever on any warranties given by the insured to a future purchaser.


MYTH:  Few properties have title problems.


FACT:  A large percentage of real estate titles have defects.  Whether these defects are unreleased prior mortgages or judgments, questionable property descriptions, or something else that can adversely affect title, many of these properties would sell only at a significant discount – and some would not sell at all – without the comfort of a title policy.  In many instances, title insurance is the comfort of a title policy.  In many instances, title insurance is the grease that keeps real estate’s wheels rolling.


MYTH:  Title problems are solved by writing a check.


FACT:  Title claims are contentious, emotional, and very expensive.  Threats to property titles through fraud and other intentional means are on the upswing, and few homeowners can afford to pay litigation costs.  Knowing that litigation fees and title coverage will be borne by the homeowner’s title insurance company offers peace of mind worth every penny of the one-time-owner premium.

Myths and Facts about Title Insurance

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