Title insurance is one of the least understood components of the real estate process. What exactly does it do, you may ask? To put it simply, title insurance protects lenders and owners against unforeseen problems with titles and mortgage liens. There can be hidden defects in a title that not even the most experience settlement agent will catch. A lender’s policy is required by every public mortgage lender and protects for the amount of the loan. This does not cover buyers, who must purchase their own policy to be covered.
Title insurance is not a recurring cost and does not have annual fees; it is paid once at the time of settlement and is good for the duration of the time one owns a property. There are four basic steps to what happens when title insurance is purchased:
1. The title insurer conducts a thorough search of the title for the property
2. The title is reviewed alongside the documents requested from the seller
3. A settlement occurs in which judges, liens, and title defects are resolved
4. The client receives their title insurance policy and the documents are recorded in the jurisdiction’s land records
Afterwards, the policy protects the owner against claims against their property. If there is an issue, the insurer steps in, incurs most (if not all) of the costs, and defends the title. Examples of issues include fraud, false impersonation, forgery, undisclosed or missing heirs, mistakes in recording legal documents, and misinterpretations of wills/deeds.
For more information on title insurance, please contact us or feel free to reach out to our colleague Marty Stanton at KVS Law Group. Marty’s e-mail address is firstname.lastname@example.org and his phone number is 301-605-1423.