What
is a title?
A
history of all transactions shown in the public records
affecting a particular tract of land.
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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.
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What is a title search?
A title search is a detailed examination of the 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 claims, defects and other rights
or burdens on the property.
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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 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've
purchased your home and can jeopardize your right to
ownership.
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What is title insurance?
Title insurance is your policy of protection against
loss if any of these problems - even a "hidden hazard"
- results in a claim against your ownership.
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How much could I lose if a claim is
filed against my property?
That depends on the claim. In an extreme case, you could
lose your entire home and property - and still be liable
to pay off the balance of your mortgage. Most claims
aren't that dramatic, but even the smallest claim can
cost you time, money and aggravation, and you may have
to pay costs for a legal defense.
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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, in accordance
with the terms of your policy, you may be reimbursed
for your actual loss up to the face amount of the policy.
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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 apparently transferred,
whatever that right may be. It's not proof of ownership,
and it doesn't do away with rights others may have in
the property. In addition, a deed won't 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.
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What about an attorney's opinion?
An attorney's opinion is based on a search of the public
records. So, once again, even the most exhaustive search
of these records may not reveal everything. Unlike a
title insurance company, an attorney is not liable if
you should suffer loss because of "hidden hazards" in
the title.
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The owner of the property I want to
purchase has lived in the home for only six months.
He had a title search done six months ago. Why do I
need another one?
Because the owner could, in a very short time, do
many things to encumber the title. For example, he could
grant easements or construct improvements that encroach
on adjacent property. It is necessary to conduct an
up-to-date title search to uncover any such problems.
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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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Are
there different types of title insurance policies?
Yes. Basically there are two different types of policies
- a loan policy and an owner's policy. The loan policy
protects the lender's interest in the property in the
amount of the outstanding balance of the loan. The owners’
policy protects the buyer’s interest in the amount of
the purchase price of the property.
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How much does title insurance cost?
Probably a lot less than you think. Charges vary in
different sections of the country, but generally the
cost of title insurance (including search, examination
and related services) amounts to about one percent or
less of the cost of the property. And unlike other insurance
premiums, which must be paid annually, a title insurance
premium is paid one time only, usually at settlement.
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How long does my coverage last?
For as long as you or your heirs retain an interest
in the property and, in some limited cases, even beyond.
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