Title Companies? Owner’s Insurance?

Title companies ensure a piece of real estate is legitimate and then issues title insurance for that property, title companies often maintain escrow accounts. What is title insurance? Title insurance protects the lender/owner against lawsuits/claims against the property that may result from disputes over the title. What is an escrow account? Escrow accounts contain all funds needed to close on the home, ensuring the money is used only for settlement and closing costs and conduct the formal closing on the home.

At the formal closing, a settlement agent from the title company will bring all the necessary documentation, explain it to the parties, collect closing costs and distribute monies; The title company will ensure that the new titles, deeds and other documents are filed with the appropriate entities.

How does a title company determine that a title is valid?
The title company makes sure a property title is legitimate, assuring the buyer may be confident that once he buys a property, he is the rightful owner of the property. By doing a title search, the title company also looks for any outstanding mortgages, liens, judgments or unpaid taxes associated with the property, as well as any restrictions, easements, leases or other issues that might impact ownership. Thorough examination of property records ensuring the person/company claiming to own the property does legally own the property; And that no one else could claim full or partial ownership of the property.

Sometimes the title company also requires a property survey, which determines the boundaries of the plot of land that a home sits on, whether the home sits within those boundaries, whether there are any encroachments on the property by neighbors and any easements that may impact an ownership claim.

Before a title company issues title insurance, it prepares an abstract of title (a short summary of what it found during the title search/history of the ownership of the property) and it will issue a title opinion letter, which is a legal document that speaks to the validity of the title.
What is title insurance?
When the title is found to be valid, the title company will issue a title insurance policy.

Insurance policy protects lenders or owners against claims or legal fees that may arise from disputes over the ownership of the property.

Two main types of title insurance: owner’s title insurance: Protects the property owner from title issues. Lender’s title insurance: Protects the mortgage company. The home buyer pays for the lender’s title insurance when you close on the house.

It’s best to buy both owner’s title insurance and lenders title insurance. For example: Let’s say you buy a home and get both lender’s and buyer’s title insurance, but someone comes forward claims they are the rightful owner of the home. If the title was wrong and they are the rightful owner of the home you purchased, your title insurance policy will pay you the value of the home and the lender the amount they lent you to buy the home.

How do you pick a title company?
Look for a title company that has years of experience doing this (have they done hundreds or even thousands of these kinds of transactions?). Contact the Better Business Bureau to determine whether the company has any complaints against it. Shop around for the best premium rates in your area; if you buy an owner’s title insurance policy, make sure you get one with as few exclusions as possible and that it covers the full purchase price of the home.

What does a title company charge?
The cost of title insurance depends on the size of the loan and varies greatly depending on the state. The premium is a one-time fee you pay at closing, not an ongoing expense. According to the Federal Reserve, “a lender’s policy on a $100,000 loan can range from $175 in one state to $900 in another.” Buyers policy is usually a few hundred dollars or more. You may even be able to get a discounted rate on your title insurance if the property was sold within the previous five years; just call and ask.

When do you meet with the title company and how often?
Consumers should feel free to contact their title company at any time to get answers to their questions on title searches, title abstracts, title insurance, escrow accounts or closings.