What is a title agency?

The title agency brings together all the participants of the home buying process (buyer, seller, real estate agent, mortgage company), and represents each of the parties equally as a neutral third party.

Their three main functions are:

• To insure all paperwork required of the contract, the loan procedures, and state and federal requirements for buying a home are in place, correct, and properly executed before they allow the home to be sold.
  

• To search for, to determine if, and insure against, any hidden problems for a potential home buyer which could cause them financial difficulty in the future. These include such things as liens or lawsuits against the property and limitations to building or adding structures to the property.
  

• Finally, to collect all the money for the purchase from those paying; and to disperse the money to those who are suppose to receive the money.
  
  

What is a title?

When you purchase a home, you are really purchasing the title to the property – which is the right to occupy and use the space. That title may be contested based upon past rights and claims asserted by others. These types of claims can infringe upon your purchase of the property or cause you to lose money. A title is the foundation of property ownership. It is the owner's right to possess and use the property.

What is title insurance and why do I need it?

We at Equilliance Title would like to take a moment to inform you of some of the procedures and requirements you will encounter as a Seller or Borrower. In most counties, it is the responsibility of the Seller/Borrower to provide at closing, a Title Insurance policy on the contracted property. Title Insurance affords protection from past events which may or may not be a part of the public records, but that can adversely effect a new owner’s interest in the property being sold to them. Title Insurance protects against matters of public record, plus hidden title defects, such as fraud, forgery, incompetence or missing heirs, that even the most diligent title search may not discover. Some states closely regulate rates. Others permit open competition, often resulting in significant differences between title insurers on rates and coverage. Depending where you live, it pays to investigate your options carefully in order to obtain the most complete coverage. Title insurance is an insurance policy that protects against future loss, should the title condition be any different than when the policy was written.

Why is transferring a title in real estate different from transferring the title to other items, such as a car?

A landowner can transfer various rights from the title such as mineral, water or utility rights. Even if the land is vacant when you buy it, it may have a history you don’t know about, so it is first necessary to search the title to determine if any defects or encumbrances are outstanding, and to clear those that you or your lender do not accept. So, in order to transfer a clear title to a piece of land, it is first necessary to determine whether any rights are outstanding.

What is a title search?

A title search is a detailed examination of the historical 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.

What kind of problems can a title search reveal?

A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.

Are there any problems that a title search cannot reveal?

Yes. there are some "hidden hazards" that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Other "hidden hazards' include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you've purchased your home and can jeopardize your right to ownership.

Why do you need title insurance?

A home is usually the largest single investment any of us will ever make. Title insurance protects against loss of value from hazards and defects that may exist in the title. These hazards include fraud, forged signatures on deeds, unknown property heirs, liens, and documentation errors. If you were uninsured and your right to title is challenged, you could lose significant money defending yourself or you could lose your home. Your mortgage lender will require a loan policy of title insurance to protect their interest in the value of your property and a homeowner should purchase an owner’s policy for the very same reason.

Are there different kinds of title insurance?
 
There are two types of title insurance policies: a lender’s policy (also called a loan policy) and an owner’s policy.

The lender’s policy financially covers the amount of a loan and provides protection to the lender. A lender’s policy does not usually represent the full property value. An owner’s policy protects the landowner and can financially cover the full property value. While a loan policy is often required as a part of a real estate transaction, an owner’s policy is generally considered optional.

With an owner’s policy, the landowner is protected against any title loss, which ensures the value of the property. Because a title policy is considered insurance, if a claim is made against the title, the title insurer must pay any and all costs associated with defense against the challenge, and if unsuccessful in that defense, reimburse the landowner for any reduction in the value of the land.

 
What is a title search?

A title search is a detailed examination of the historical, public records concerning a property. These records include deeds, court records, property and name indexes, and many other public documents. The purpose of the search is to verify the seller’s right to transfer ownership, and to discover any defects or encumbrances on the title.

 
What kind of problems can a title search reveal?

A title search should show all title defects and encumbrances, as well as other claims and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.

 
Are there any problems that a title search cannot reveal?

Yes. There are some hidden hazards that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other hidden hazards include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names, and clerical errors in the records. These defects can arise after you have purchased property and can jeopardize the right to ownership.

 
Can a deed serve as proof of ownership?

No. A deed is just a document used to show transfer of ownership, and is evidence only that you have taken over whatever rights the seller had in the property. A deed does not eliminate the rights others may have and a deed won’t show you liens or claims that may be outstanding against the title.

 
What is a title opinion?

An opinion is the conclusion and judgment of a trained professional, often an attorney, based on a search of the public records. Just like with an abstract, a title opinion only protects against loss related to oversight on behalf of the individual making the opinion, not hidden hazards.

 
The property owner already has title insurance. Why do I need another title search?

A title policy insuring your seller does not protect you. Also, many things could have happened to the land since that owner’s policy was issued. Your seller could have a mortgage, a home equity loan, judgments, or unpaid taxes that would not be covered in the seller’s title policy.

 
Is title insurance as important as homeowners’ insurance?

Absolutely. Homeowner’s insurance typically provides protection against theft, accidental damage, or natural disaster such as a tornado, earthquake or hurricane. While these types of loss can certainly be substantial, losses from a defective title could be devastating. If a fire destroys your home, you can rebuild and buy new possessions. If the title to the land fails, you could lose the right to inhabit your home as well as the land it occupies.

 
How long does title insurance coverage last?
 

The lender’s policy of title insurance lasts until the mortgage is paid in full. An owner’s policy of title insurance lasts for as long as you or your heirs retain an interest in the property.

 
How does title insurance protect my heirs?
 

A title insurance policy provides coverage from the time of its effective date back to the origin of the title. After the property has passed to your heirs, if any defect prior to the policy should arise, the title insurance company would defend the title for your heirs as it would for you if you were alive.

 
Can I decline having title insurance?
 

Yes and no. While the lender will likely require a loan policy of title insurance, the purchaser can choose what type of owner’s protection, if any, to use with regard to title. It’s important to remember however, that only title insurance protects the owner against hidden hazards, and only title insurance reimburses the owner for legal expenses for defense or claims that affect the value of the property.

How does title insurance protect against hazards?

An owner’s policy of title insurance requires the insurance provider to pay for defending against any lawsuit attacking your title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium generally paid at closing, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.

What is a closing?

Closing, which is also known as "settlement" or "escrow," is the event where the title to a property is transferred from seller to buyer. Closing is typically held in an office, such as that of an attorney, title agent or title insurance company, and involves the completion of all the necessary paperwork to finalize the agreement between buyer and seller. In addition, all financial issues are settled at closing – closing costs - and once the title is successfully transferred, the necessary documents are prepared, signed, and filed with local authorities.

What are closing costs?

Closing costs are all costs required to close the real estate transaction. They can include (but are not limited to) surveying fees, property taxes, title insurance, attorney fees, agent fees, points, loan origination fees, primary mortgage insurance (PMI), and the balance of your down payment. Prior to closing, you should review your final closing statement or HUD-1 Statement (whichever is in use) to ensure that all the calculations are correct and that you have been given all the credit for deposits and other agreed upon buyer and seller credits. Also recheck all lender, title, and escrow fees to make sure they are accurate.

Why does your lender require title insurance during refinancing?

From the lender’s standpoint, a refinanced mortgage is actually a brand new mortgage – complete with the same risks that may have been present originally. During the refinance process, your original mortgage is paid off – and your existing lender’s title insurance policy is rendered null and void. However, if you purchased an owner’s policy of title insurance at your original closing – that policy will remain in effect as long as you or your heirs own the property.

What is a title defect or encumbrance?

A title defect is something missing from the title, for example, an undisclosed heir from a previous owner who could make a claim on the land. An encumbrance is a claim made upon the land, but not by the landowner. For instance, your local power company may have an easement for a power line that will serve your house.

If you are borrowing money to purchase land, your lender will require your title to be cleared of any outstanding defect or encumbrance, before the land is transferred and the loan approved.