SPECIAL FEATURE — Buying or Selling Real Estate?
When you purchase real estate or obtain mortgage financing, you often have a choice of companies to perform required real estate title services.
What is Title Insurance?
Title insurance differs from other types of insurance. Other insurance focuses on possible future events and is renewed (for a fee) annually, but title insurance insures against existing title defects due to past events, such as forgery in the chain of title. Its premium is a one‑time cost. The primary purpose of title insurance is to minimize losses caused by items that may affect title to real estate. Because a parcel of real estate has many past owners, many encumbrances (such as monetary liens, easements, mineral rights, etc.) may still exist.
A title search, which is performed prior to its issuance of title insurance, is a detailed examination of public records. Its purpose is to verify a right to transfer ownership, and to determine whether others have any encumbrances or rights to use the real estate. A title search may show a number of items such as unpaid taxes, unsatisfied mortgages, judgments against prior owners, and restrictions that limit the use of the real estate.
Protecting purchasers against loss is accomplished by the issuance of a title insurance policy. A policy states that if the status of the title is other than as set forth in the policy, and if the insured (owner or mortgagee) suffers a loss because of such difference, the title insurance company will reimburse the insured for that cost (and related legal expenses) up to the face amount of the policy.
Title insurance exists to help cover the unexpected. That’s why a professional title agent — someone who has successfully resolved a host of complicated issues — can make the difference.