WHAT IS TITLE INSURANCE?

Title insurance is actually a process, with the insurance policy being the end product. This process starts with a comprehensive search of public records to determine if any liens or other encumbrances are attached to the title. During the search, detailed information from potentially hundreds of sources is gathered and reviewed, including tax records, federal, state and local records, court judgments, deeds and an evaluation of whether the property characteristics are accurately reflected by the information on the title. Not surprisingly, one in four title searches uncovers some problem that must be rectified prior to the close.
What kind of problems? There are four primary categories that can cloud a title and result in significant risk for a prospective homebuyer. The title search meticulously seeks out and evaluates any known indication of any of these issues; however, even the most comprehensive search may not uncover every hidden area of title risk:
• Liens can be placed against a title by any party with an unpaid financial obligation against the property owner. The nature of these claims can be everything from unpaid child support or alimony to unpaid parking tickets, taxes or bills from contractors like electricians or plumbers.
• Errors may have occurred during the course of previous ownership changes that could have included recording errors, typographical errors, incorrect legal descriptions, incorrect indexing of land records or title search errors resulting from undisclosed issues like unsatisfied claims not shown in the public record.
• Claims against a property may come from missing heirs or heirs born after the execution of a will, the dower or courtesy rights of spouses of former owners, claims from ex-spouses or even from government or corporate entities. They can also arise when the mental competence of a grantor of deed is called into question; when wills are not properly probated or are misinterpreted; when a title was transferred by a minor; or when a grantor of a deed did so while under undue influence.
• Fraudulent activity such as forged signatures or fraud in the execution of documents, the use of false powers of attorney in the execution of documents, false impersonation by someone claiming to be the owner of the property or any other fraudulent activity can invalidate any title work that occurred from that point on. Prospective buyers should be certain they know what issues affect the title of the property they plan to buy and recognize that even new construction properties can be subject to these same kinds of problems. Buyers should make sure that all issues that come to light from the title search, are adequately resolved prior to the closing.