FAQs from a Title Company Near You
Finding a reputable title company near you can be challenging when you don’t know what they do. In fact, many people don’t know much about titles or title insurance until they buy their first home. Fortunately, we’re here to answer some frequently asked questions…
1. What is a title?
A title is the legal right to ownership of a property. However, it is not one document that indicates your right to own a piece of real estate. The title is an interest in a property that results from a collection of multiple documents and records that have legal bearing on the property. This includes chain-of-title documents and deeds, as well as encumbrances against the property – liens, court orders, outstanding mortgages, taxes or fees, and all the paperwork that records when these encumbrances were created or paid off. Older properties will have more documentation, whereas newer properties may have less paperwork in their titles.
2. What is a title search? Why do I need a title company?
When you intend to buy a piece of real estate, you need to hire a professional title company to perform a title search for that particular property.
A title search involves collecting all the aforementioned documentation, and then examining it carefully to uncover any potential hazards against the title. Some title hazards are ‘discoverable’, meaning that they are easy to find or well documented; this includes things like outstanding mortgage loans or taxes, utility liens, or obvious defects with the title. However, some title hazards are ‘hidden’, and are not easy to find or not documented at all; this can be issues like an unknown heir who has claim to the property, or title defects due to forgery and fraud. Have a look at our previous post on title hazards for more information.
Technically, anyone can perform a title search, as titles are usually kept at the local county courthouse or clerk’s office – these documents are open to the public. However, it is not advisable for a layperson to do their own title search. These are complex, jargon-filled legal documents that are not always easy to decipher. You need someone with legal expertise and a trained eye to spot defects and hazards.
3. What is title insurance?
Title insurance protects both buyers and lenders from defects that could render the title illegitimate, or challenge your right to ownership. Essentially, you are insured in the event that one of these issues occurs – title insurance typically pays for legal representation if your title is contested, or reimburses the owner if the contestation cannot be settled in court.
Once your title search has uncovered all discoverable hazards, you’ll have a better idea of what you’re buying into when purchasing this particular property. Your realtor and title company should try to resolve all discoverable hazards before you buy the property, but some hazards are unavoidable. If, for instance, the government has a utility liens that allows them to dig up part of your property to do water-line maintenance, your title insurance could be used to cover the cost of repairs to your garden. Title insurance is also vital in the event of a hidden hazard.
4. How much does title insurance cost? Who pays?
The cost of title insurance depends on the purchase price of the property. Like all insurance – the greater the coverage, the greater the cost. The costs – and who pays what – also vary by state and county. Consult a title company near you to get an accurate estimate of the costs involved.
Contact us today for more information about titles, hazards, and title insurance.