Why Title Insurance?
People often ask why they need title insurance or how title failure occurs. An owner’s policy indemnifies the insured in the event of hidden risks, including:
- Documents that were executed under false, revoked or expired powers of attorney
- False impersonations of the true property owner
- Undisclosed heirs
- Improperly recorded legal documents
- Prescriptive rights of another that did not appear on record or that were not disclosed by survey
- Defective acknowledgments due to improper or expired notarization
- Corporate franchise taxes as liens on corporate real estate assets
- Gaps in the chain of title
- Mistakes and omissions that result in improper abstracts
- Forged deeds, mortgages, wills, releases of mortgages and other instruments
- Deeds by minors
- Deeds that appear absolute, but are held to be equitable title
- Inadequate legal descriptions
- Errors in tax records
- And more…
Owner Policy Of Title Insurance
- Just as lenders want security with their loan policy, buyers should also want to protect their investment with an owner’s title policy.
- For a, one-time, premium you can receive an owner’s title insurance policy that will protect your property against hidden risks or undiscovered interests.
An owner’s policy provides:
- Protection from financial loss due to covered claims that may be asserted against the title to your property, up to the face amount of the title policy.
- Payment of legal costs in the event that the title insurer needs to defend your title against a covered claim.
- Payment of successful claims against the title to your property covered by the policy, up to the face amount of the policy.
Peace of Mind
Title insurance adds security and peace of mind to your ownership. Remember that policies issued by Hill Country Titles help prevent the potential loss of your property due to the above causes, as well as many others. If you have any questions about title insurance, the experts at Hill Country Titles are here to help.
Owning real estate is one of the most precious values of freedom enjoyed in this country. When you decide to buy any type of property, title insurance helps ensure the property is yours and that no one else has liens, claims or encumbrances other than those disclosed or arranged by you (including a mortgage).
If you plan to buy or sell property, having a title insurance policy protects your transaction and provides peace of mind to everyone involved.
The Basic Steps
Once you decide to buy a home, what happens next?
First, your loan application needs to be approved. After the lender completes a credit check on you, they will obtain an appraisal and order a survey of the property. Legal documents are then prepared for signature by buyer and the seller, including a new deed, note and mortgage. The title to the property is also checked to identify any debts owed against the property and confirm the current legal owner.
Finally, when all things are in order, the settlement (or “closing”) takes place. The seller will sign the new deed conveying the property to you, and you will sign a new note and mortgage. The old loan on the property is then paid off and the new loan set up. The seller, realtor, attorneys, title company and others performing services for you are then paid. And finally, the title insurance policies are issued to you and your lender.
What Do Title Companies Do?
There are six steps that take place when transferring a land title. It is the title company’s job to manage the six step process:
Step 1: The order is received
The process begins when the title company receives a real estate earnest money contract, or agreement to close. The contract is “receipted” by the title company, which includes acknowledging receipt of the contract and any earnest money received. An escrow account is then set up on your behalf and the earnest money is deposited for holding until the closing.
Step 2: Ad Valorem Tax Check
Next, various taxing authorities are contacted to determine what taxes (if any) are owed on the property, and/or that all taxes have been paid. The base rate for each taxing authority is also obtained so the taxes for the current year can be prorated between the buyer and the seller.
Step 3: Title search and abstracting
Copies of all the documents relating to the property are then gathered from various public records. A complete ownership history of the property is created so the examiner can see a step-by-step transfer of ownership from its original patent to the current owner.
Step 4: Examination
The examiner then identifies the current legal owner and any debts owed on the property by following the flow of ownership evidenced in the documents gathered by the abstractor. In order for the title company to insure the new buyer as the only claim to ownership, the examiner must confirm each previous transfer was handled correctly and legally.
Step 5: Commitment
Once the examiner determines current ownership and has identified any issues affecting the property, a Commitment for Title Insurance is created and delivered to all parties involved in the transaction, including the seller, buyer, lender, realtor, and attorney(s). The buyer should review the commitment and identify any objectionable title exceptions and any other issues affecting the property that were not known or disclosed to the buyer during purchase negotiations.
Step 6: Settlement
The desired event for the seller and buyer is to “close” the transaction. This involves the escrow officer bringing together all the involved parties and overseeing the execution of the documents necessary to facilitate the sale, such as the deed, new mortgage, etc.. The title company will facilitate recording of all recordable documents and then disburse money to the parties who will receive funds. After closing, the terms of the contract are typically fulfilled and the transaction is complete
Step 7: Issuance of the Title Insurance Policies
After the transaction has closed and funded and the documents have been recorded at the courthouse, the title company issues the title insurance policy. The owner policy of title insurance is issued to the buyer, and the mortgagee policy of title insurance is issued to the lender. This is all done in accordance with the terms and conditions of the commitment for title insurance.