What is title insurance?
What kinds of defects does title insurance protect you from?
It protects you against loss due to title defects, liens, or other similar matters. Title insurance protects you from claims of ownership by other parties. It protects you against losses from problems that arose before you bought the property. The title company will defend you in court if there is a claim against your property, and will pay for covered losses.
Is it required?
Your lender will require you to buy a Loan Policy of Title Insurance to protect their interest. An Owner’s Policy of Title Insurance is highly recommended to protect YOUR interest. A lender’s policy will not cover you, as the owner, if there is a title defect.
If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?
The lender’s policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender’s ability to foreclose and recover its principal and interest. And, in the event of a claim there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner’s policy is a bargain.
How long does it last?
A loan policy lasts until the loan is paid off. An owner’s policy lasts as long as you or your heirs own the property.
Do you have to renew your policy?
You pay for title insurance only once, when you buy the policy, unless you decide later to add more coverage. Keep your policy, even if you transfer your title or sell the property. Coverage lasts as long as you or your heirs own the land and may last forever for any title warranties made when you sell the property.
What happens if I transfer my title to my business, my trust, my LLC, or my children?
Depending on the type of policy you have, it may not provide coverage when you transfer your title into your business or to someone else that is not considered an insured. To determine what type of coverage you have, read your policy, check with your title agent, or speak with an attorney.
Is it like homeowner's insurance?
No, title insurance is different from other types of insurance. It does not insure against fire, flood, theft, or any other type of property damage or loss. It protects against losses from ownership problems that arose before you bought the property but were not known at the time you bought the property. It does not guarantee that you will be able to sell your property or borrow money on it.
What’s the difference between a title commitment and a title policy?
The title commitment comes before closing; the title policy is issued after closing. The commitment says that a title company is willing to issue title insurance under certain conditions and if the seller fixes certain problems. The policy provides coverage for the property.
What does the title commitment do?
The title commitment lists any potential issues, exclusions, or exceptions. It alerts the buyer to issues that exist and could cause problems in the future. It does not guarantee that there are no current issues or that none will arise in the future. You should discuss how to clear potential issues with the title agent. You may wish to review potential issues with a lawyer.
What types of polices are there?
There are two types of policies, owner’s policies and loan policies.
- Owner’s Policy
The owner’s policy protects you against losses from ownership problems that arose before you bought the property, but that were not known at the time you bought the property. For example, you could lose title to your property due to fraud, errors or omissions in previous deeds, or forgery of a previous deed. The owner’s policy protects the buyer from the covered risks listed in the policy.
- Loan Policy
The loan policy is issued to the mortgage lender. It protects the lender’s interest in the property until the borrower pays off the mortgage.
Why do I need a loan policy?
Most lenders will require a loan policy as a condition of the mortgage. The policy will repay the balance of your mortgage if a claim against your property voids your title. A loan policy covers up to the amount of the principal on your loan.
How long does the loan policy last?
Loan policies remain in effect until you repay the loan. Most lenders will require you to buy a new loan policy if you refinance your home. When the new loan pays off the existing loan, the old loan policy expires.
Why does my owner’s policy cost more than the loan policy?
When you buy an owner’s policy and a loan policy at the same time, the loan policy is issued at a discounted price. If you decide not to purchase an owner’s policy, you will pay full price for the loan policy.
Do I get a discount if I refinance?
Yes, the premium charged for a loan policy on a refinance is a discounted rate
Do I get to pick my own title company?
You may choose any title company you want; you don’t have to use a company selected by a real estate agent, builder, or lender.
If there’s something you don’t like in the policy, can you change the policy language?
Title policy forms in Maryland are standardized. This means most of the policy language is the same regardless of which company that sells the policy. Title agents are required to use the standardized forms. The parts of the policy that may be changed are the property description in Schedule A, the Exceptions in Schedule B, and the Exclusions. You should review those sections carefully. You can request corrections if you notice an error. The agent may be able to remove an exception, if a title problem is cleared up or if you buy additional coverage.
Check the policy’s legal description of the land against your survey to confirm that what is being conveyed in your contract is accurate. Title insurance does not protect against boundary disputes with your neighbor, unless you purchase additional coverage.
What is a title defect?
A title defect is anything that can cause a title to be considered invalid or defective in some way. Some examples are:
- Invalid documents due to forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation.
- Failure of any person or entity to have authorized a transfer or conveyance.
- A document affecting title that is not properly executed, signed, witnessed, notarized, or delivered.
- Undisclosed or unrecorded easements not otherwise apparent on your land.
- No right of access to and from the land.
- A document executed under a falsified, expired, or otherwise invalid power of attorney.
- A document not properly filed, recorded, or indexed in the public records.
- Ownership claims by undisclosed or missing heirs.
- Defect arising from an improper prior foreclosure.
- Undisclosed restrictive covenants affecting your property.
Lien issues can also cause title defects. Some examples of lien issues are:
- Any statutory or constitutional contractor’s, mechanic’s, or materialman’s lien for labor or materials that began on or before the policy date. Talk to an attorney about your rights.
- Lien for labor or materials furnished by a contractor without your consent.
- A previous owner failed to pay
- a mortgage or deed of trust
- a judgment, tax, or special assessment
- a charge by a homeowners or condominium association.
- Other liens or claims that may exist against your title that are not listed in the policy.
Notify your title company immediately if someone files a lien or claims an interest in your property. Failure to do so could jeopardize your claim. Contact the underwriter listed on the policy and follow their claim-filing procedures.
What doesn’t a title policy cover?
A title policy generally won’t cover mistakes or defects, financial issues, or rights issues.
- Defects that are created after the policy is issued.
- Defects that you create, or of which you had knowledge.
- Problems that arise because of your failure to pay your mortgage, or to obey applicable laws or restrictive covenants that were disclosed to you.
- Certain taxes and assessments.
- Losses resulting from rights claimed by someone else occupying the land. The title company may need to inspect the property. There may be a charge for the inspection.
- Claims from other people who may have certain rights if your property is near a body of water or has a river or stream flowing through it.
- Condemned land, unless a condemnation notice appeared in the public record on the policy date or the condemnation occurred before the policy date.
- Violations of building and zoning ordinances and other laws and regulations related to land use, land improvements, land division, and environmental protection.
- Disclosed restrictive covenants limiting how you may use the property. Request copies of restrictions and have your attorney explain them.
WE ARE AVAILABLE TO ANSWER ANY QUESTIONS
It is our mission to handle the purchase, sale or refinance of your home or commercial property with the utmost competence and at the most competitive prices in the industry. We are available to answer any questions. Although title companies are the closing agents of the bank that will be your lender, you have the right to select the title company of your choice.
Our aim is a smooth and pleasant closing without last minute issues!