Title Examinations and Title Insurance
A title examination is a search of all public records that involve documents that have been recorded in association with a property. The examiner looks at past deeds, wills, and trusts to ensure that title passed correctly to each new owner and that prior owners all released their claims on the property. The examiner attempts to verify that all prior mortgages, judgments, and other liens have been paid in full and officially released. Examinations usually cover the past thirty years of a property's history. Title examinations also review additional facts about the property, such as easements, details about mineral rights, and pending legal actions.
Title insurance protects against many types of losses that could occur if someone else claims a right of ownership of the property. Title insurance is required by lenders, and two policies are normally issued, one for the lender and one for the new owner. The lender's coverage is usually for the loan amount, while the owner's policy is for the sales amount.
Title insurance covers the following:
Problems that were not apparent during the title search or were missed by the title examiner
Problems that occur when a deed or other document in public records is found to be a forgery
Liens that result from unpaid taxes or liens by a former owner
Easements that aren't shown in public records
Several other types of mistakes in public records
Title problems are called clouds on the title, or
A title policy will pay your legal fees if you must go to court to defend the deed. If you lose the property, the insurance pays you for your loss up to the amount of the policy. However, title insurance companies are not usually quick to pay, and they often pay the least amount possible to settle a claim, so there's no true guarantee that you'll recover all of the losses associated with a problem property.
Title policies do not cover title defects that occur while you own the property. Policies often exclude problems related to easements, liens, and mineral and air rights. Ask your closing agent to explain your title insurance coverage, including its exceptions — items that are
Title policies are paid with a one-time fee that you submit at closing. Ask your closing agent about future purchases of inflation riders to increase your coverage as the property increases in value.
Buyers can sometimes save money on the title search if the current owner's policy can be updated and reissued. Ask your closing agent if that is possible for your purchase.
