What is title insurance?
If you are refinancing your home or trying to buy a new home, the term Title Insurance will appear at some point. An incredible number of people have no idea what title insurance is, but they buy it every day. Simply put, title insurance is a policy that limits the risk to the buyer, owner, and lender of a real estate transaction. Insurance may not protect all 3 financially in every deal, but by eliminating liability risk, title insurance has a positive effect on all parties involved.
At some point, if a person wanted to buy a property, they would contact an attorney to investigate the property. The attorney would take a trip to court and obtain all the necessary records to make sure the property is free of mortgages, tax ties, municipal ties, and judgments. He would make sure that the person (s) selling the property is the actual registered owner (s) and would also investigate the chain of title to make sure the way the property is owner acquired property does not file any claim. to other people or groups. If the person buying the property needed a loan, the attorney would assure the Bank that the property was clean or had liens, that is, any ties or other property rights that might be infringed. As time went by, Banks became multinational and it became more necessary for some type of insurance to indemnify Banks in case there was a problem after closing. Lawyers still made up a good portion of title insurance in the United States. However, title companies appeared to specialize in these types of transactions. In many cases, for simple residential transactions, title companies are quicker and more efficient to go through the lender process. Banks like Chase or Bank of America; I have no idea who owns what or what attorney to use as far as insuring them against risk in a certain area. Thus, they allow the borrower to choose a title company or attorney to issue insurance to protect them.
Refinancing
In many ways, a lender’s policy and a homeowner’s policy are similar. If a person is refinancing, title insurance is purchased, at the borrower’s expense, to assure the new bank that their mortgage will be in first lien position in court after closing. At this point, the bank can request a title insurance commitment. This commitment is necessary for most loans, as the Bank will request a Title Policy from the lenders. The title company conducts a search of the court records and examines them. In Pennsylvania, deeds, mortgages, bonds, etc. they are recorded in the order they arrive at court. Therefore, if you have a previous mortgage and the bank registers a new mortgage, the new mortgage will be in the second lien position. In this case, the old mortgage would take precedence over the new mortgage when it comes to foreclosure rights. The old Mortgage, once paid off, would have to be satisfied. And then the new mortgage would move to the top position in the registrar’s office. This is the main function of the lender’s title insurance in a refinance. The new bank is making sure that if you ever default on your loan with them, they can foreclose on the property to get their money back. The house is collateral for the loan and they are just protecting themselves.
Purchases
When you take possession of real property, you want to have collateral for the many different risks that are involved in that type of transaction. The first of which is identifying the right owner. I’m sure you’ve heard the old “Brooklyn Bridge” line regarding suckers and real estate. Title companies verify it for you. I’ve had people try to kick me out of a property that they not only didn’t own, but had no idea who the real owners were. As the proposed owner, you also need to know if there is any kind of link attached to the property. There are many types of links, but the most common are; Mortgages, Sentences, Tax Links and Municipal Links. These types of links are attached to the property not just the owner who increased them. Therefore, if that owner transfers ownership to you and nothing is done about these links, you will keep them. You may not be financially responsible for them, but these types of links do not take into account who the actual owner of the property is; They are only interested in getting paid. If you get stuck with someone else’s back taxes, the tax collector doesn’t care. The government wants your money and will sell your house to get it. Therefore, I cannot stress enough the importance of having a qualified licensed title company examine your potential investment.
I would just like to reiterate that the potential risks that are involved with real estate are so numerous and vast, it’s easy to see why most banks and mortgage brokers require it and most people who are in the real estate business. they realize why this is so. so vital to the process. It’s great to take some comfort in the fact that the land has been investigated and is cleared for transfer. Keep in mind the notion that it is a one-time fee for the assurance that you are assuming ownership and you only have to worry about the future, not the past. And, an owner’s policy lasts as long as you and your heirs own the property, where else can you get that kind of convenience for yourself and your family?
