Title Insurance in the Sale of Real Estate

October 27, 2010
One of the charges in a real estate sale transaction is title insurance. If a loan is to be used by a buyer purchasing a property, the lender will require that the buyer purchase a mortgage policy insuring the lender until the loan is paid off. Title insurance protects the insured against future losses that might arise from from events that happened in the past. The seller purchases title insurance to insure a buyer from the same type of events.
Title companies maintain records which are searched whenever title insurance is ordered for a particular property. It is the public records that contain information about documents recorded in the public land records.
Basically, the search will discover
(1) that the seller is , in fact, the legal owner of the property;
(2) that the "estate" or degree of ownership being sold is currently and accurately vested in the seller;
(3) the presence of any unsatisfied mortgages, judgements or similar liens which must be "satisfied" (paid off) before "clear title: can be conveyed;
(4) existing restrictions, easements, rights of way or other rights granted to others who are not owners which might limit the right of ownership;
(5) the status of property taxes and other public and private assessments.
The title company will prepare a preliminary title report listing any items discovered.
The buyer and the lender will review this report and either find the information acceptable or unacceptable.
At close of an escrow, the title insurance will be paid and a policy of title insurance will be issued. There is only a one time premium that covers the insured parties as long as they continue to own the house or , in the case of the lender, until the loan is paid off.
It is important that a buyer understand that the title insurance policy only covers those items that can be discovered from a search of the public records.