Title Insurance Explained

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What is Title?

The word “title,” can mean a number of things. In real estate, “title,”refers to one’s right to ownership, or any form of evidence of land ownership. Title is your rights to the land and improvements.

 What is Title Insurance ?

Title insurance is a protection mechanism that will protect you against any kind of damage caused by a defect in the title. Defect in a title?  What?  A title can be defective for a number of reasons such as forgery and impersonation.  Title insurance will protect against such defects as well as  the expenses incurred in defending the title (your right to ownership). Title insurance not only verifies ownership, it will also detect any possible “clouds” on your title. Clouds?  Unlike a defect,  a cloud implies that the title is not clear and these clouds could be in the form of IRS claims, liens, or other uncertainties of ownership.

Further, there are two different title insurance policies issued in every real estate sale. The first type is an owner’s policy, which will protect the new owner from any ensuing claims to the property. The second type is a lender’s policy, which will protect the lender against loss of an unpaid loan balance in the event of a claim.

Title insurance policies are important because they protect against possible non-recorded claims against your property and ensure free and clear ownership. As such, these policies benefit consumers in establishing safety and security in owning real estate.

To ensure the property is free to transfer title, the Title company will perform a search on the property using a “pin” or “permanent index number” which is each parcel of lands own unique ID number.  The title company will collect information about the property that is found in public records such as: the county recorder’s offices; property tax records; sometimes in county courthouses.  

Who Pays for Title Insurance?
Title can be paid in a number of ways, but the most common is for the buyer and the seller in a transaction to pay for  a policy. There are two types of policies: a lender’s policy and an owner’s policy. As far as the lender’s policy goes, it is usually paid for by the buyer of the real estate. The owner’s policy is paid for by the seller of the real estate.

Sari Levy

Sari Levy is Managing Broker of Lucid Realty.

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