What is Title Insurance and Why Do You Need It?
Real estate has traditionally been a family's most valuable asset. It is a form of wealth that is protected by many laws. These laws have been enacted to protect one's ownership of real estate and the improvements located on the land, namely, your home. The owner, the owner's family, and the owner's heirs have rights or claims in and to the property that you are buying. Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the Internal Revenue Service, or various other individuals or corporations. The real estate may be sold to you without the knowledge of the party having a right or claim in and to the property. In addition, you may purchase the real estate without having any knowledge of these rights or claims. In either event, these rights or claims remain attached to the title to the property that you are buying until they are extinguished.
The Past Determines Your Future
We all normally purchase insurance to cover us against a future potential loss arising out of some future event such as a collision. Title insurance, however, is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., an event that happened prior to the date you purchased the property.) These risks are far less obvious than those protected against by automobile insurance, but can be just as devastating. The following information will answer some commonly asked questions about title insurance.
Will You Get Clear Title?
It is of utmost importance that you receive clear title to the property when you purchase real estate. In order to do so, you must first be informed of any existing rights or claims that may, in the future, threaten your title and possession to the property. Title insurance provides you with this twofold protection.
How Do You Find Out What Claims Exist?
In order to determine the status of title, Bromberg Rosenthal LLC conducts a diligent "title search" of the public records for those documents associated with the property. We examine those recorded documents in order to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded defects, liens or encumbrances upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens and encumbrances are reported to you prior to your purchase of the property. Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction. In addition, you are protected against any recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the coverage of the particular policy issued in the transaction. This is one of the primary benefits you receive from title insurance.
What About Undiscovered Claims?
The title to the property that you have purchased could be seriously threatened or lost completely by hazards which are considered "hidden risks." "Hidden Risks" are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of those public records. Matters such as forgery, incompetency or incapacity of the parties, fraudulent impersonation, and unknown errors in the records are examples of "hidden risks" which could provide a basis for a claim after you have purchased the property. In order to protect you against this possibility, we obtain title insurance coverage to protect you for such claims. This is the second primary benefit you receive from title insurance.
How Does a Title Insurance Policy Protect Against All These Claims?
If a claim is made against your insured title, your title insurance policy protects you by: (1) Defending your title, in court if necessary, at no cost to you, and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.
Title Insurance Protects Your Asset
Title insurance gives you the assurance that possible clouds on title to the property you are purchasing ‑ which can be discovered from the public records ‑ have been called to your attention so that the defects can be corrected before you buy. Additionally, it is insurance that if any undiscovered claims covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as your title insurance policy provides.
Only One Premium
Unlike other forms of insurance, the original premium is your only cost as long as you or your heirs own the property. There are no annual payments to keep your Owner's Title Insurance Policy in force.
Future Additional Benefits to You
If you have an owner's title insurance policy, you will be able to get so-called "reissue rates" on all future loan policies required by your lender if you ever refinance your loan. The savings can be as much as 40% of the title insurance premium for the refinances loan. Also, your property may be more attractive to a potential purchaser when you go to sell it if you can produce an owner's title insurance policy. Most title insurance companies will give your purchaser a re-issue rate credit based upon on your purchaser's owner's title insurance policy.