What is title insurance?
A contractual arrangement entered into to indemnify loss or damage resulting from defects or problems relating to the ownership of real property, or from the enforcement of liens that exist against it.
There are two types of policies: An Owner's Policy, A Lender's Policy
Title insurance is ordinarily taken out by a purchaser of the property, or by an individual lending money on the mortgage, in an amount equivalent to the purchase price of the property. Title insurance companies are specially organized for this purpose. They retain complete sets of abstracts of title or duplicates of the record, hire expert title examiners, and prepare all types of conveyances and transfers. Following a title search, such companies furnish a certificate of title, indicating the findings of the title examiner with respect to the state of the title to the property involved. An insurance of title warrants the validity of the title in any and all events.
Who typically pays for title insurance?
Local customs in the county where the property is located vary as to whether the seller or the purchaser pays for the Owners Policy. This is negotiable and should be addressed prior to executing the Contract For Sale/Purchase Agreement.
Can I choose my own title insurance company?
Yes, you may. However, most choose to purchase title insurance from professional companies recommended by their real estate agent, lender, attorney real estate professionals etc. It is always smart to do your own independent research before selecting a title agent.
Am I required to purchase title insurance?
The legal requirement of obtaining title insurance varies from state to state. However, if you need a mortgage, your mortgage lender will require this protection for an amount equal to the loan. If you don’t need a mortgage, title insurance is the only way to protect your investment in your property from future claims regarding your title.
What happens if a claim is filed?
If the claim is valid, the policy covers the cost of loss or damages sustained by the insured up to the face amount of the policy. If litigation is based on an alleged defect insured against by the policy the title company is obligated to provide legal defense for the insured.
Is title insurance regulated in the State of Florida?
Yes. However, ancillary expenses, such as wiring fees, title search, settlement/examination fees etc., are not. As such, it is always wise to do your due diligence to confirm pricing and quality. The issue of regulation varies state to state.
The Department of Insurance for the State of Florida regulates title insurance rates within the state. Premiums are based on the sales price and/or the amount of the mortgage. Additional charges may apply for various endorsements, if applicable.
What some examples of potential defects on title, which title insurance can protect against?
• Sham Deeds
• Unknown Heirs
• Fabricated or False Affidavits
• Unpaid Judgments
• Unfiled Liens
• Forged Documents
What does a title company do for a client?
• Issue the title policy.
• Protect and defend if your title and right to ownership are challenged.
• Search public records and help solve certain title defects prior to closing.
• Issue a title commitment
• Prepare your Closing or Settlement Statement (HUD 1).
• Coordinate and handle closing of the real estate transaction upon request.
• Record documents with the proper county.
What does title insurance cover, and how long is one protected?
If an insured suffers a loss as a result of title defects, the insurer will reimburse you for loss up to the face amount of the policy and any related legal expenses.
A title insurance policy protects you from any past issues that have occurred with your property for as long as you own the property.
Acceleration Clause- Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
Adjustable Rate Mortgage- Mortgage loans under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates.
Amortization- Equal periodic loan payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.
Appraisal- An estimate of the value of property, made by a qualified professional.
Assessment- (1) The valuation of real estate for purposes of taxes or special improvement charges. (2) The amount of taxes or special improvement charges. Special improvement charges are usually for the costs of streets, sidewalks, sewers, etc.
Assignment- A written transfer of one's interest in something, such as a promissory note or a deed of trust.
Closing- Process of completing a real estate transaction during which all required instruments are signed and/or delivered, money is disbursed, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.
Closing Costs- The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the costs.
Cloud on Title- An irregularity, possible claim, or encumbrance, which, if valid, would adversely affect or impair the title.
Deed- A written document by which the ownership of land is transferred from one person to another.
Documentary Stamps- A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.
Equity- The value of a homeowner's unencumbered interest in real estate.
Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value.
Escrow- Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual.
Foreclosure- The legal process by which an owner's right to a property is terminated, usually due to default.
Lien- A legal claim against an asset which is used to secure a loan and which must be paid when the property is sold.
Mortgage- A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government- insured or loan- guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.
Mortgage Commitment - A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.
Note- A legal document that obligates a borrower to repay a mortgage loan at a specified interest rate during a specified period of time or on demand.
PMI- Mortgage insurance provided by non-government insurers that protects a lender against loss if the borrower defaults. (Private Mortgage Insurance)
Quitclaim Deed - A deed which transfers whatever interest a maker of the deed may have in a particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but rather transfers to the buyer whatever interest the grantor has.
Subordination- The act or process by which a person’s rights are ranked below the rights of others. For example, a second mortgagee’s rights are subordinate to those of the first mortgage.
Survey- A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.
Title- The right to obtain full ownership of property, where another maintains legal title to the property. Legal title is actual ownership of the property. When a contract for the sale of land is executed, equitable title passes to the buyer.
Title Insurance Policy - A contract of title insurance under which the insurer, in keeping with the terms of the policy, agrees to indemnify the insured against loss arising from claims against the insured interest.
Warranty Deed- A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it, such as mortgage claims, tax liens, title claims, judgments, or mechanic's lien.