A title is the foundation of property
ownership. It is the owner's right to possess and use the
property. Transferring the title to real estate is different from
transferring the title to other items 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. To transfer a clear title to a piece of
land, it is first necessary to determine whether any rights are
outstanding.
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. It offers financial protection against
paying claims and legal fees involved in defending the title should
a dispute arise. Whether you are purchasing a home from a current
occupant or building a new home yourself, you will need to ensure
that there are no unpaid taxes, debts or liens associated with the
property. While there are no past owners associated with newly
constructed homes, there may be other owners of the land on which
the home is being built. A title search will uncover any existing
liens or ownership claims as well as any unpaid debts of the
contractor that is building your home - debts that you could be held
responsible for unless you are protected.
There are two types of title insurance: lender's title
insurance and owner's title insurance.
- All lenders require title insurance (also known as a loan
policy) to protect the loan they issue the buyer against the cost
of settling any disputes that may arise. The cost of lender's
title insurance is usually based on the amount of your loan and
decreases each year over the life of the loan. The lender's title
insurance does not protect the buyer's interests.
- The buyer should obtain an owner's title policy, which
protects him or her against any problems that were not uncovered
in the title search. Owner's title insurance is usually issued in
the amount of the real estate purchase and lasts as long as the
owner maintains a financial interest in the property. Both the
lender's and the buyer's policies are typically issued together as
soon as a title search is performed and any problems are resolved.
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.
A deed is not necessarily proof of ownership. A deed is
just a document by which the right of ownership in land is
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.
An abstract is a history of the property title as revealed by
the public records. It may not show property limitations and
restrictions. 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.
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.
