What is title insurance and why do I need it?
This is a question that I get a lot. Here are some facts that you need to know.
- Title is the evidence of a person’s right to use and possess land.
- Title Insurance is a contract which protects against any losses caused by defects in the title or an interest in real property which is insured.
- Title Insurance has a one time premium.
- Title premiums are regulated by the State of Michigan. It’s risk avoidance rather than risk assumption.
- A title commitment is a report of the condition of title and what steps must be completed in order to close your transaction.
Here’s an example: You are purchasing a property and title work is ordered (by your realtor or lender). Once the search is complete, we find that there is still a mortgage showing up from a previous owner. In order for you to proceed with your purchase, we have to “clear” that “condition”. We have to make sure that there actually isn’t a mortgage (lien) on the property from a previous owner. There are lots of different things that can turn up in a title search. As a title insurance agency, we assist you in clearing any conditions that may show up in o,rder for your transaction to be smooth and worry free.
On your settlement statement you will see that the Seller will pay for an Owner’s Policy. This is guaranteeing that you are purchasing a property that is free and clear of any liens or additional interests. On the Buyer side there is Lender’s Policy that you will pay for. This guarantees to your lender that they are in First Lien position and that there are no other liens on the property that could come before them.
About a month after your closing, you will receive your Final Policy in the mail. This is your title insurance policy. Keep it in a safe place with your other important documents.
I hope that this answers some of your questions about title insurance. If you have more questions – keep reading – I’ll update weekly with new information!