| Frequently Asked Questions
Buying a home is, for many of us, the biggest single investment
we'll ever make. Knowing this, most homeowners provide for the
security and safekeeping of their homes by insuring them against
hazards such as fire, theft and weather damage. But there is another hazard that can pose an even greater risk to
homeownership: defects in the title to your property can cause you
to lose part or all of the investment in your home. Fortunately, there is a way to protect your investment from these
title defects. It comes in the form of title insurance.
What is title insurance and why do you need it? Below
we've listed the answers to these an other commonly asked questions. We suggest that you read through this information carefully. It
will help you to better understand the value of title insurance in
protecting your homeownership. And the general real estate
information will help make the home-buying process a smoother one.
What is a
title?
A title is the foundation of property ownership. It is the
owner's right to possess and use the property.
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Why is transferring the title to real estate different from
transferring the title to other items, such as a car?
Because land is permanent and can have many owners over the
years, various rights in land may have been acquired by others (such
as mineral, air or utility rights) by the time you come into
possession of it, even if the land has never before been built
upon. So in order to transfer a clear title to a piece of land, it
is first necessary to determine whether any rights are outstanding.
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What is a
title search?
A title search is a detailed examination of the historical
records concerning a property. These records include deeds, court
records, property and name indexes, and many other documents. The
purpose of the search is to verify the seller's right to transfer
ownership, and to discover any claims, defects and other rights or
burdens on the property.
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What
kinds of problems can a title search reveal?
A title search can show a number of title defects and liens, as
well as other encumbrances and restrictions. Among these are unpaid
taxes, unsatisfied mortgages, judgments against the seller and
restrictions limiting the use of the land.
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Are there any problems that a title search cannot reveal?
Yes. There are some "hidden hazards" that even the most diligent
title search may never reveal. For instance, the previous owner
could have incorrectly stated his marital status, resulting in a
possible claim by his legal spouse. Other "hidden hazards" include
fraud and forgery, defective deeds, mental incompetence, confusion
due to similar or identical names and clerical errors in the
records. These defects can arise after you've purchased your home
and can jeopardize your right to ownership.
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What is
title insurance?
Title insurance is your policy of protection against loss if any
of these problems - even a "hidden hazard" - results in a claim
against your ownership.
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How much could I lose if a claim is filed against my property?
That depends on the claim. In an extreme case, you could lose
your entire home and property - and still be liable to pay off the
balance of your mortgage. Most claims aren't that dramatic, but even
the smallest claim can cost you time, money and aggravation, and you
may have to pay costs for a legal defense.
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How does title insurance protect my investment if a claim should
arise?
If a claim is made against your property, title insurance will,
in accordance with the terms of your policy, assure you of a legal
defense - and pay all court costs and related fees. Also, if the
claim proves valid, you will be reimbursed for your actual loss up
to the face amount of the policy.
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The owner of the property has a deed. Isn't that proof of
ownership?
Not necessarily. A deed is just a document by which the right of
ownership in land is transferred., whatever that right may be. It's
not proof of ownership, and it doesn't do away with rights others
may have in the property. In addition, a deed won't show you liens
or claims that may be outstanding against the title.
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Wouldn't an abstract show property limitations and restrictions?
Maybe - and maybe not. An abstract is a history of the property
tile as revealed by the public records. Abstracts may contain errors
and do not disclose "hidden hazards" that can threaten your property
title if you do not have a title insurance policy.
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What about an attorney's
opinion?
An attorney's opinion is based on a search of the public records.
So, once again, even the most exhaustive search of these records may
not reveal everything. Unlike a title insurance company, an attorney
is not liable if you should suffer loss because of "hidden hazards"
in the title.
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The owner of the property I want to purchase has lived in the home
for only six months. He had a title search done six months ago. Why
do I need another one?
Because the owner could, in a very short time, do many things to
encumber the title. For example, he could grant easements or
construct improvements that encroach on adjacent property. He could
get married or divorced, or have a lien filed against the property.
It is necessary to conduct an up-to-date title search to uncover any
such problems.
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If the builder of my home already has title insurance on the
property, why do I need it again when I purchase the land from him?
A title policy insuring the builder does not protect you. Also, a
great many things could have happened to the land since the
builder's policy was issued. Liens, judgments and unpaid taxes for
which prior owners were responsible may be disclosed after you
purchase the property - causing you aggravation and costing you
money.
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Are
there different types of title insurance policies?
Yes. Basically there are two different types of policies - a loan
policy and an owner's policy. The loan policy protects the lender's
interest in the property as security for the outstanding balance
under the buyer's mortgage. The owner's policy safeguards the
buyer's investment or equity in the property up to the face amount
of the policy. (Title insurers in many states offer increased policy
coverage through inflation endorsements to cover increases in value
due to inflation.)
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How much does title
insurance cost?
Probably a lot less than you think. Charges vary in different
sections of the country, but generally the cost of title insurance
(including search, examination and related services) amounts to
about one percent, or less, of the cost of the property. And unlike
other insurance premiums, which must be paid annually, a title
insurance premium is paid one time only, usually at settlement.
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How long does my coverage last?
For as long as you or your heirs retain an interest in the
property and, in some cases, even beyond.
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Where can I get title insurance?
From any licensed title insurance company or its representatives
operating in your state. When choosing a title insurer, it is
important that you look for a company with expertise and experience,
as well as the financial strength to protect you should a claim
arise.
Garden
State Abstract Company will be pleased to assist you in this
process.
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Who is
Commonwealth Land Title Insurance Company?
Headquartered in Richmond,
Commonwealth Land Title Insurance Company founded the title
insurance industry in 1876 and is today one of the largest title
insurance underwriters in the United States. With a network of more
than 4,000 policy-issuing locations nationwide, Commonwealth has the
financial capabilities to safeguard your investment, and the people
and locations to give you the expert, dependable service you
deserve.
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These frequently asked
questions and answers are intended for informational purposes
only. Your title insurance policy contains terms and conditions
that may limit or restrict coverage. Consult your attorney for
specific advice regarding your legal rights and consult your
real estate professional when selling or purchasing a home.
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