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Title Insurance -
Is It Really Necessary?
Often required to help protect
the lender . . .
Many of us often refer to a
person who has “bought or sold”
real estate. Even in newspapers
we see advertised real estate
for sale, yet it is only the
“title” to real estate which can
be
bought or sold.
Title is sometimes defined as
the means whereby an
owner is enabled to maintain or
assert his/her possession
in enjoyment of property.
Another definition is that title
is the evidence of right which a
person has to the possession of
property. As applied to the
investigation of titles, the
word “title” has acquired the
sense of history. Therefore,
searching the
title, investigating the title,
and giving an opinion of title
all
refer to the compilation and the
interpretation of the history
of the title, a service
performed by the title company.
The conclusions of the study
into the history of real
property
are summarized on a policy of
title insurance. |
It should be remembered that title
is synonymous with the words
“right”, “interests,” “estate.”
Such words are used to denote the
degree, quantity, nature and extent
to which a person may
have an interest in real estate.
An insurance policy that is written
on title to real estate differs from
every other form of insurance
in its degree to indemnify an
insured in the event of a loss by
reason of a defect or flaw of title
PRIOR to the date of policy. All
other forms of insurance agree to
indemnify the insured in the
EVENT OF LOSS due to a FUTURE event
and after the date of the policy.
Basically, title insurance is the
company’s opinion concerning the
ownership and marketability
of title to a particular parcel of
real property. This can only
be ascertained after a thorough and
complete search of all the records
affecting title to the parcel
insured. A title company is a
service organization and performs a
service for those interested in
buying, selling, or loaning money on
real estate. When you purchase a
title insurance policy, you are
buying the services of experts.
The company is willing to back the
opinion of these experts with the
additional feature of insurance.
Title insurance, in effect, insures
marketable title which is, in
essence, title that a prudent
person,
well advised as to the fact in law,
would be willing to accept. Title
insurance policies, however, do
not insure against several major
areas which are either too difficult
or too expensive to cover, including
defects in title known to the
insured, easements and liens not
shown by the public
records, interest of parties in
possession, or matters requiring an
accurate survey.
When dealing with real property,
title of the seller cannot be
assumed. We must ascertain
and then be assured that what we
bargain for is in fact owned by the
seller. A purchaser of real property
is not satisfied with assurance that
he will not be dispossessed of his
property or that no adverse claim
may appear to harass his quiet
enjoyment of the property. Every
person, when purchasing real
property, wants to know that he will
be able to sell, lease, or mortgage
the property freely. Because there
are as many interests in land as
there are leaves on a tree, a
purchaser
wants to be assured that their title
to the land is marketable.
Title insurance is often required to
protect the lender against loss if a
flaw in title is not found
by the title search made when the
house is purchased. You may also get
an owner’s policy to
protect yourself. Also, attorneys
provide title insurance as part of
their services in examining
title and providing a title opinion.
It is important to remember that a
title insurance policy issued only
to the lender does not
protect you. Similarly, the policy
issued to a prior owner, such as the
person from whom you are purchasing
the property, does not protect you.
To protect yourself from loss
because of a mistake made by the
title searcher, or because of a
legal defect which does not appear
on the public records, you will need
an owner’s policy. Such a mistake
rarely occurs, but, when it does it
can be financially devastating to
the uninsured. When you buy an
owner’s policy it is usually much
less expensive if purchased
simultaneously with a lender’s
policy. In addition, if you are
buying a home which has changed
hands within the last several years,
inquire at the title company that
issued the previous
title insurance about a “reissue
rate” which could be a lower charge
than the cost of a new policy.
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For Buyers |
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