Most people are familiar with many real estate tools and terms; 'bank loan', 'interest rates', 'floor plans' and 'survey'. On the other hand, title insurance is far less understood, even though it is routine in real estate transactions.
Two common questions I get are,
"Why am I paying for it?"
"How is it any different from a traditional insurance policy?"
Simply, title insurance insures against past events rather than future mishaps. Mistakes in recording the deed, encroachments or easements, and even disputed ownership or fraud are covered with a policy.
Our firm often works with Investors Title. Their Senior Title Attorney, Jane Barkley, provided some additional insight:
What are the benfits?
Title insurance protects the integrity of the process of a real estate transaction. The title policy insures against loss for such title defects as:
- Fraud, forgeries, and false identity
- Missing marital interests
- Missing heirs and estate matters
- Recording errors
- Assessments and taxes
- Incorrect legal descriptions, matters of survey and access (in some cases)
Working with title underwriters, the Title Company can provide some affirmative coverage against loss for unique issues such as:
- Old, restrictive covenants
- Easements that cannot be defined on the ground by a survey (unplottable)
- and even some coverage for the parties to the transaction
How does the process work?
The buyer or their attorney requests coverage for the purchase. The attorney certifies title to the Company. The Company issues a commitment for insurance, which includes:
- Payment of current mortgages, taxes, assessments, and judgements
- Preparation, execution, and recording of deeds, deeds of trust, and lien wavers, among others
The commitment will also show the exceptions for title that will appear on the policy:
- Taxes not yet due and payable
- Easements and rights of way for utilities, roads, water, and sewer
- Covenants that may restrict the use of the property
- Matters disclosed by a survey
- Any rights of others shown by the public records or in accordance with NC law
Once the transaction closes, a final opinion from the certifying attorney is sent, along with copies of the document, and the title policy is issued.
Keep in mind, owner coverage is optional but lenders will almost certainly require a title policy. In NC, it is a bargain to get owner coverage - a separate premium isn't charged for a second policy. Simultaneous issue means the customer pays for one policy and gets the second (owner) policy for $25 plus and additional premium for the difference in the policy amounts.
What are some of the more difficult projects your company has successfully taken on?
We recently agreed to insure a large, high end condominium project in a very litigious neighborhood. We worked closely with the developer, his attorney, and the neighborhood association to craft appoval and affirmative coverage. It is now under construction.
We see situations like this all the time, especially in Charlotte and other high development areas. Changing uses of a residential neighborhood is often quite difficult. ie. a developer wants to put 6-10 homes on property originally used as a single family lot. This requires review of all restrictions, proposed plans, and perhaps some approvals by neighbors.
The folks at Investors Title Insurance are a wealth of information and a tremendous resource in a real estate transaction. For buyers, their services offer security and peace of mind, by insuring mistakes of the past so they aren't haunted in the future. Learn more about Title Insurance