Title Insurance is much more than just a lender requirement. For buyers, it’s a critical way of understanding what you are purchasing and being sure that you actually own what you’ve bought, without third party claims to ownership or use of any part of it. For sellers, it’s a relatively inexpensive way to back up the warranties that you are providing to your buyers.
Title insurance is a unique product in that it protects buyers from current and future risks based on past acts and omissions. When you work with a good title company, much of the value of your title insurance lies in the fact that what the company does is really to eliminate the risk (rather than just insuring against the possibility of future risks) before closing. We fully search title to the property so that the owner can be assured (as well as insured) that there are no unpaid mortgages, no other judgments or liens, no risk of missing heirs or ex-spouses who could claim an interest in the property, no fraudulent prior transfers, etc. In our experience, more than half of all residential sales in this area require some curative measure in order for clean title to be transferred (national statistics show that one in three transactions requires some sort of curative title action before closing). A fuller explanation of the types of risks often encountered by owners that are covered by title insurance can be found at www.firstam.com/title/resources and at www.homeclosing101.org.
In addition, as part of the title insurance process, we identify and provide copies of recorded easements, covenants, rights of way, and similar instruments that might impact or limit the owner’s use or enjoyment of the property, so that buyers can make an informed decision about their purchase.
We make Owners’ Extended Coverage (or “OEC”) available for just $75 (for residential transactions), and this expands the buyers’ protection to cover certain standard items that would otherwise be “excepted” from the title insurance coverage, such as the effect of any unrecorded easements, survey matters, mechanics liens, and/or unpaid taxes and assessments. Deletion of the survey matters exception does often require a survey or “Improvement Location Certificate” which either the seller or the buyer, at their expense, will need to order from a surveyor. If that coverage is not obtained, then the title insurance policy would not cover matters that would be shown by a current survey. If OEC is not part of the buyer’s title policy, then the buyer is at risk for matters such as the effect of unrecorded easements, undisclosed encroachments, fence line disputes or similar matters that would be shown by a survey, and mechanics liens not yet filed against the property, with the buyer’s only possible recourse being a suit against the seller for possible breach of warranties or failure to disclose.
When considering the value of title insurance, including OEC, please keep in mind that payment of a relatively small one-time fee at closing protects an owner’s property rights for as long as that owner or the owner’s heirs own the property, and also protects the owners when they sell the property and provide warranties as to title to their buyers. We would always be happy to discuss the benefits of title insurance and the closing process in general. If you have questions about these matters, please contact Brett or Gwen at 719-539-1001.
We hope to be working with you soon!