Title to property

The most accurate description of title is a package of rights in real property. A title search is the process of determining from the public records just what these rights are and who owns them.

Real estate

Real estate has traditionally been a family’s most valuable asset. It is a form of wealth that is protected by many laws. These laws have been enacted to protect one’s ownership of real estate and the improvements located on the land. The owner, the owner’s family, and the owner’s heirs have rights or claims in and to the property that you are buying. Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the Internal Revenue Service, or various other individuals or corporations. The real estate may be sold to you without the knowledge of the party having a right or claim in and to the property. In addition, you may purchase the real estate without having any knowledge of these rights or claims. In either event, these rights or claims remain attached to the title to the property that you are buying until they are extinguished.

The past determines your future

Title insurance is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., event prior to the acquisition of the property.) These risks are far less obvious than those protected against by automobile insurance, but can be just as devastating.

Will You Get Clear Title?

It is of utmost importance that you receive clear title to the property when you purchase real estate. In order to do so, you must first be informed of any existing rights or claims that may, in the future, threaten your title and possession to the property. Title insurance provides you with this twofold protection.

How do you find out what claims exist? (Title search)

In order to determine the status of title a diligent search is conducted of the public records for those documents associated with the property. This is a history of the ownership of a particular piece of property. Those documents found in the public records are then examined to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded defects, liens or encumbrances upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens and encumbrances are reported to you prior to your purchase of the property. Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction. In addition, you are protected against any recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the coverage of the particular policy issued in the transaction. This is the first benefit you receive from the title insurance.

A title search is a means of determining that the person who is selling the property really has the right to sell it, and that the buyer is getting all the rights to the property (title) that he or she is paying for.

Your title search also includes a tax search which determines the present status of general real estate taxes against the property. It will reveal if taxes are current or whether any taxes are past due and unpaid from previous years. The tax search should also indicate any special assessments against the land and whether they are current or past due.

What about undiscovered claims?

The title to the property that you have purchased could be seriously threatened or lost completely by hazards which are considered “hidden risks.” “Hidden Risks” are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of those public records. Matters such as forgery, incompetence or incapacity of the parties, fraudulent impersonation, and unknown errors in the records are examples of “hidden risks” which could provide a basis for a claim after you have purchased the property. In order to protect you against this possibility, Morgan & Associates Title Company provides insurance coverage for such claims. This is the second benefit you receive from title insurance.

How Does a Title Insurance Policy Protect Against All These Claims?

If a claim is made against your insured title, the title insurance company protects you by (1) Defending your title, in court if necessary, at no cost to you, and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.

Survey

A mortgage lender will usually require a Surveyor to look at the property to verify the lot size, check the location of improvements, look for evidence of easements  that are not shown of record and check on who is living there.

The purpose of this is to supplement the information learned by the title search. In the eyes of the law, any buyer of real estate is assumed to have notice of all matters properly sown in the public records as to that real estate as well as any information that an actual inspection may reveal.

If the surveyor detects an unrecorded easement or other evidence of outstanding rights that could affect the owner’s title and possibly the value and intended use, the company tells the buyer of these things before he or she closes the purchase. Those matters must then either be disposed of or shown as exceptions in the title insurance policy.

Commitment

When these searches have been completed, the title company issues a commitment to insure, stating the conditions under which it will insure the title. Closing of the transaction can proceed after clearing up any defects in the title which may have been uncovered by the search and examination.

Your mortgage lender is as concerned as you, the buyer, about the quality of the title because the property is to be security for the new mortgage loan. In order to assure their protection the mortgage lender will always require the buyer to purchase lenders title insurance.

The lender’s title insurance, however, doesn’t protect the new buyer of the property. Although the land is the same, the interest of the buyer and the interest of the mortgage lender are very different. The provisions contained in the lender’s title insurance policy are very different from those contained in a buyer’s policy, so the buyer should obtain his own policy, usually issued simultaneously with the lender’s policy.