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What is title insurance and why am I paying for it? This is a question that is asked a lot at the closing table. The easiest way to explain why you might need title insurance is to give you an example of what CAN happen.
Let’s take a look at Jane and Jason (fictional). They’ve lived in their house for 35 years. They have several acres. They want to split two of their acres off of the main parcel and sell them to Dawn and David, their children. They work with the township to acquire the split. Dawn and David’s lender orders their title work. Once the search has been done the title work comes back with an issue. When Jane and Jason purchased the property, they bought it from the City of Danville. Upon searching the property, we found that the City of Danville had never received a Deed when THEY purchased the property. SO, they never had the legal right to sell. OOPS. Even though Jane and Jason have lived there for most of their lives, the property is technically not all “theirs” since it was never properly deeded to the City of Danville to begin with.
This is a situation where title insurance comes in VERY handy. It seems odd that something like that can happen, but it does. Our job is to protect our customers and make sure that title is free and clear of any liens or interests.
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There is a lot of media attention lately to purchasing foreclosed properties. This can be a great way of purchasing more home for your money. From a title insurance viewpoint, this transaction is only slightly more complicated.
As a title company, we always insure to buyers and sellers that there are no outstanding liens on the property. In a foreclosure situation, we do an additional search. This is called a “Name and Party Search”. This allows us to insure that there are no outstanding personal liens on the property, such as a lien from the IRS or State Treasury.
It is critical to track the chain of title through the foreclosure and redemption process to make sure that there are no gaps. Once this is done, the closing is handled normally and the title insurance policies are issued.
It is important to have an experienced realtor and lender to guide you through this process.
Please watch for future updates on the status of the market and what your title company can do to assist you.
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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!