What Is a Property's Title?
A property’s Title is the legal documentation that includes the specifics about a property and who owns it. It is often shown in the form of a Deed.
What is a Deed?
A home’s Deed is a written document that shows who legally owns a particular property. When someone is ready to buy a house, the buyer and seller must sign a deed in order to legally transfer the property's ownership rights to the new owner.
Why Title Insurance?
When a new property is purchased, to issue a loan, the lender will require proof that there are no problems with the property’s title and that the seller has legal ownership of the property. Problems such as mechanics liens, unpaid taxes, missing heirs, etc., could impact the future ownership rights, which could lead to restrictions to the use of the property or financial loss. Title searches are completed and title insurance policies are issued to protect the lender and future owner from such problems.
The Title Search Process
Crescent Abstract’s trained title professionals will complete a thorough and extensive examination of the public land record to uncover any issues with a property’s chain of title. These searches reach back many, many years to ensure that your new ownership is free and clear of any defects.
The Three Types of Title Insurance:
Lender’s Title Policy
A Lender’s Policy, also known as a Loan Policy, is required by most lenders before issuing a mortgage. The Loan Policy protects only the lender’s interests should a title issue arise. As the mortgage is paid down, the amount of policy coverage decreases and ultimately reduces to zero coverage once the home is paid off. A buyer’s interests are NOT protected under the Loan Policy.
Owner’s Title Insurance Policy
Just as you would purchase health insurance, auto insurance or life insurance, it is important to provide coverage for the very large investment made when buying real estate. Occasionally, title issues, such as unpaid taxes or unknown heirs to a property, can be missed at the time of title search, which is why it is vitally important to insure yourself and your investment against such problems.
Title Insurance for residential purchases are a very modest, one-time premium, based on the total cost of the property, which is paid at settlement. The Owner’s Policy protects the new owner’s financial and legal ownership. Crescent Abstract will pay for any covered claims or attempts on your title ownership for as long as you or your heirs have an interest in the property.
An owner’s policy is not always an automatic part of the settlement process, so please be sure to carefully consider the may benefits of purchasing an Owner’s Title Insurance Policy and feel free to reach out to our team with any questions you may have.
Enhanced Title Policy
While a standard Owner’s Policy protects your ownership from past defects in the chain of title, an Enhanced Title Policy will provide additional coverage for a broader scope of ownership challenges, such as:
-A document in your title is forged after the policy date
-You are forced to remove structures due to lack of a prior building or zoning violation
-You lose your land due to an existing restriction violation
Typically, an Enhanced Policy only costs about 10% more than a Standard Policy premium, which is a one-time fee paid at settlement. Another benefit of the Enhanced Policy is that your policy amount increases 10% per year, up to 150% to cover increases in your property’s value.
Enhanced Policy Cost Analysis:
Based on a $200,000 purchase price
Owner’s Policy $1,595.00
Enhanced Policy $1,754.50
Additional cost for Enhanced Policy $159.50
When refinancing, even if you use your original lender, you will most likely be required to provide a new title search and purchase a new Loan Policy. You will not need to purchase a new Owner’s Policy, since your original policy covers you and your heirs for as long as you have an interest in the property.
New Construction Homes
New Construction homes pose unique challenges when it comes to chain of title. Through time, there were likely many prior owners of the unimproved land before the builder took ownership. A title search will uncover any liens and define the legal boundaries of the newly developed property.
Most builders employ many trade providers while building a new home, which opens a new homeowner up to claims from suppliers and subcontractors claiming they were not paid for the work they did, which could result in a lien on the new home. Protecting your new investment with an Owner’s Policy will shield you from possible title related problems and pay for legal fees incurred while defending yourself against a claim.