You may already have an idea about the work that goes into a successful closing. However, few new homeowners recognize the efforts involved in searching and underwriting a title insurance policy one part of your closing that can prove invaluable to new buyers down the road.
Public Records Search. An in-depth title search is generally comprised of a thorough examination of public records. This can be difficult because, depending on the jurisdiction, liens and judgments on a property may be filed a number of ways by the name of owner, the street address, lot number, etc. Many title companies today have created exhaustive and systematic methods for conducting these searches, resulting in large databases of consistently indexed data that facilitate faster and easier title searches.
Search Findings. Title searchers uncover more than simply liens and judgments, however. A thorough title search will include information about mortgages, street and sewer assessments, taxes and levies, and countless other issues that may be a material matter to the buyer.
Behind the Scenes. The legwork behind the issuance of a title insurance policy is rarely seen by the buyers or sellers of a property. Title professionals work to remove any existing “clouds” (judgments, easements, liens, etc.) prior to issuing a policy in order to decrease their financial risk to insure the title.
Peace of Mind - The data collected through a title search not only gives the buyer peace of mind regarding the property they’re purchasing, but also helps reduce the risk of title problems arising in the future. This makes a title insurance policy a valuable investment towards protecting an even greater investment — your home.
If you’ve purchased a health or auto insurance policy, chances are, you have an idea of how traditional insurance coverage works: you pay your premium and the insurance company takes on the financial liability of your auto or health risks. Obviously your rates will be adjusted according to how risky & you are as a customer. These types of insurance assess the risk of future loss, like car accidents, health problems, and other mishaps. Title insurance, on the other hand, helps eliminate risk – the risk being the loss or compromise of various homeownership rights due to existing issues with the property’s title. The policy then offers financial indemnity against any of these defects that may be uncovered.Minimizing Risk - In order to properly eliminate risk, the process of issuing a title insurance policy includes a thorough search of public records and court documents to assess and remove any “clouds,” or issues on the property’s title. Claims - Because of the statistically small percentage of title insurance claims filed each year, it may be difficult for homebuyers to gauge the value of their purchase. However, the low number of claims actually illustrates the effectiveness of title insurance providers in locating and minimizing risks. In fact, a large piece of the premium paid for a policy goes to fund the legwork required to thoroughly research the property’s title. Fees - Each policy price is based on the purchase amount of the home (for an owner’s policy) or the total amount of the loan (for a loan policy). Length of Coverage - Also unlike other types of insurance, the purchase of an owner’s title insurance policy is a one-time event; there are no future premiums to pay as long as you or your heirs hold an interest in the property. That means that this fee, generally paid when you purchase the property, will protect you and your family indefinitely for so long as you hold an interest in the property. That said, if you refinance your home, your lender will likely require you to purchase a new loan policy, as this type of insurance protects the lending institution only for the life of the loan. Your owner’s policy, however, will remain effective.
Thanks to Heidi Dombrowski Branch Manager at First American Title 20860 N. Tatum Blvd., Ste. 100 Phoenix, Arizona 85050