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Frequently
Asked Questions
Why
is transferring the title to real estate different
from transferring the title to other items, such as a
car?
Because
land is permanent and can have many owners over the
years, various rights in land (such as mineral, air
or utility rights) may have been acquired by others
by the time you come into possession of it, even if
the land has never before been built upon. 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
kinds 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.
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Are
there any problems 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 your home and can jeopardize your right to
ownership.
How
can there be a title defect if the title has been
searched and a loan policy issued?
Title
insurance is issued after a careful examination of
copies of the public records. But even the most
thorough search cannot absolutely assure that no
title hazards are present, despite the knowledge and
experience of professional title examiners. In
addition to matters shown by public records, other
title problems may exist that cannot be disclosed in
a search.
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Why
do you need title insurance?
To
protect possibly the most important investment you
will ever make - the investment in real estate.
A lender goes
to great lengths to minimize the risk of lending
money for the purchase of real estate. First, credit
is checked as an indication of the borrower's ability
to repay the loan.
Then the
lender seeks assurance that the quality of the title
to the property to be acquired and which will be
pledged as security for the loan is satisfactory. The
lender does this by obtaining a loan policy of title
insurance.
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Does
the Loan Policy protect the borrower?
No.
The loan policy protects the lender against loss due
to unknown title defects. It also protects the
lender's interest from certain matters which may
exist, but may not be known at the time of the sale. That
is why a real estate purchaser needs an owner's
policy, which can be issued at the same time as the
loan policy, for a nominal one-time fee.
What
is the danger of loss?
If
the lender has title insurance protection and the
owner does not, what possible danger of loss exists?
As an example,
assume real estate was purchased for $100,000. A down
payment of $20,000 is made, and a lender holds an
$80,000 mortgage lien, or beneficial interest. The
lender acquires title insurance protecting the
lender's interest up to $80,000. But the purchaser's
down payment of $20,000 is not covered.
What if some
matter arises affecting the past ownership of the
property? The title insurance company would defend
and protect the interest of the lender. The
purchaser, however, would have to assume the
financial burden of his or her own legal defense. If
the defense is not successful, the result could be a
total loss of title.
The title
insurance company pays the lender's loss and is
entitled to take an assignment of the borrower's
debt. The purchaser loses the down payment, other
equity in the property that may have accumulated, and
the property. And the balance on the note is still
due!
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What
does title insurance protect against?
Here
are just a few of the most common hidden risks that
can cause loss of title or create an encumbrance on
title:
- False
impersonation of the true owner of the
property
- Forged
deeds, releases or wills
- Undisclosed
or missing heirs
- Instruments
executed under invalid or expired power of
attorney
- Mistakes
in recording legal documents
- Misinterpretations
of wills
- Deeds by
persons of unsound mind
- Deeds by
minors
- Deeds by
persons supposedly single, but in fact
married
- Liens for
unpaid estate, inheritance, income or gift
taxes
- Fraud
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What
protection does title insurance provide against
defects and hidden risks?
Title
insurance will pay for defending against any lawsuit
attacking the title as insured, and will either clear
up title problems or pay the insured's losses. For a
one-time premium, an owner's title insurance policy
remains in effect as long as the insured, or the
insured's heirs, retain an interest in the property,
or have any obligations under a warranty in any
conveyance of it. Owner's title insurance, issued
simultaneously with a loan policy, is the best title
insurance value a property owner can get.
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How
does title insurance protect my investment if a claim
should arise?
If
a claim is made against your property, title
insurance will, in accordance with the terms of your
policy, assure you of a legal defense - and pay all
court costs and related fees. also, if the claim
proves valid, you will be reimbursed for your actual
loss up to the face amount of the policy.
The
owner of the property has a deed. Isn't that proof of
ownership?
Not
necessarily. A deed is just a document by which the
right of ownership in land is transferred, whatever
that right may be. It is not proof of ownership, and
it doesn't do away with rights others may have in the
property. In addition, a deed will not show you liens
or claims that may be outstanding against the title.
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Wouldn't
an abstract show property limitations and
restrictions?
Maybe
- and maybe not. An abstract is a history of the
property title as revealed by the public records.
Abstracts may contain errors and do not disclose
"hidden hazards" that can threaten your
property title if you do not have a title insurance
policy.
How
long does my coverage last?
For
as long as you or your heirs retain an interest in
the property and, in some cases, even beyond.
If
the builder of my home already has title insurance on
the property, why do I need it again when I purchase
the land from him?
A
title policy insuring the builder does not protect
you. Also, a great many things could have happened to
the land since the builder's policy was issued.
Liens, judgments, and unpaid taxes for which prior
owners were responsible may be disclosed after you
purchase the property - causing you aggravation and
costing you money.
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