What is title insurance and why do you need it?

Title insurance is protection against loss arising from problems connected to the title to your property. Before you owned your home, it may have gone through several ownership changes and the land on which it stands went through many more. There may be a weak link at any point in that chain that could emerge to cause trouble. For instance, a previous owner, their family or their heirs have rights or claims in and to the property that you are buying or someone along the way may have forged a signature in transferring title. Others that may have an interest in or lien upon the property could include governmental bodies, contractors, lenders, judgment creditors, or various other individuals or corporations. Or, there may be unpaid real estate taxes.

What does title insurance protect me against?

• False impersonation of the true owner of the property
• Forged deed releases or wills
• Instruments executed under invalid or expired power of attorney
• Undisclosed or missing heirs
• Mistakes in recording legal documents
• Misinterpretations of wills
• Deeds by persons of unsound mind
• Deeds by minors
• Deeds by persons supposedly single, but in fact married
• Fraud
• Liens for unpaid estate, inheritance, income or gift taxes

Title insurance covers the insured party for any claims and legal fees that arise out of such problems. These rights or claims remain attached to the title to the property that you are buying until they are rectified.

How does title insurance protect against claims to property?

If a claim is made against your insured title, the title insurance provider protects you by: (1) Defending your title, in court if necessary, at no cost to you, and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.

Title insurance gives you the assurance that possible claims on title to the property you are purchasing - which can be discovered from the public records - have been called to your attention so that these defects can be corrected before you buy. It is insurance that, if any undiscovered claims covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as your title insurance policy provides.

What are the basics of a title search?

• Title searches start with the most recent deed, searching the grantee's name (the person now holding title) backwards in time, until the deed when the grantee acquired the property is located.
• That grantor's name is then searched backwards in time in the grantee's book to find when the grantor acquired title as a grantee.
• This process continues, and over time, the property description involves larger and larger parcels of land.
• Eventually, the searcher finds the U. S. Patent.

Title searchers also look for reconveyances (proof that the encumbrances are paid off), and they look for easements, rights-of-way, CC&Rs, other elements affecting title to the property. Here are more records that are searched to piece title together to ensure that chain has not been broken:

• Marriage records
• Death certificates
• Tax sales

What are the steps in the title process?

Initial Request for Title Insurance
An order for title insurance is opened via Title365.com. A preliminary report can be issued with the minimum of information; without even identifying the buyer or the terms of the sale. It shows the record title as it presently exists and is only an offer to provide insurance.

On-Site Searching and Examining
Advantage Title then performs three searches: Property, Name, and Tax searches. From that information, a preliminary report is created. As well, the process of obtaining hard copies of recorded documents begins.

Technical Review
The skill and expertise Advantage Title’s title officers is the key to providing you with a useful, accurate title report. Once the report is issued, the review begins by making a technical analysis of the documents of record. An interpretive view of all recorded matters is made to evaluate their impact on the title to the property. Among the questions our examiner asks are: “Would any of the recorded matters prevent the buyer from using the property for its intended purpose?” and “Can antiquated leases be eliminated from the policy per a review of the current leases?”

Inspection Analysis
In anticipation of ALTA coverage, a site inspection is ordered. From the inspection report, the initial title product is supplemented to show any encroachments or other off-record matters which would ultimately impact the title.

Co-Insurance, Re-Insurance, Other Details
If co-insurance or re-insurance is needed for a transaction, Advantage Title expedites the confirmation of approval. As a resource and as a facilitator of the transaction, title insurers assume the responsibility for as many details as possible and are able to direct you to other resources where necessary.

Documents in the Title Process

• Preliminary Report
• Commitment - Shows the condition of title in the way we are willing to issue it.
• Pro Forma - Specimen of what the requested policy, as requested, will look like. Underwriting issues not completed. Not binding upon the company.
• Policy - Final product. Contract of indemnity between named insured and the company.

What are the ways to hold title?

Title to real property may be held by individuals, either in Sole Ownership or in Co-Ownership. Co-Ownership of real property occurs when title is held by two or more persons. There are several variations as to how title may be held in each type of ownership. The following brief summaries reference seven of the more common examples of Sole Ownership and Co-Ownership.

SOLE OWNERSHIP

• A man or woman who is not married
  Example: John Doe, a single man.
• An Unmarried Man/Woman
  A man or woman, who having been married, is legally divorced.
  Example: John Doe, an unmarried man.
• A Married Man/Woman, as His/Her Sole and Separate Property
  When a married man or woman wishes to acquire title as their sole and separate property, the spouse must consent and relinquish all right, title and interest in the property by deed or other written agreement.
  Example: John Doe, a married man, as his sole and separate property.

CO-OWNERSHIP

• Community Property
  Property acquired by husband and wife, or either during marriage, other than by gift, bequest, devise, descent or as the separate property of either is presumed community property.
  Example: John Doe and Mary Doe, husband and wife, as community property.
  Example: John Doe and Mary Doe, husband and wife.
  Example: John Doe, a married man
• Joint Tenancy
  Joint and equal interests in land owned by two or more individuals created under a single instrument with right of survivorship.
  Example: John Doe and Mary Doe, husband and wife, as joint tenants.
• Tenancy in Common
  Under tenancy in common, the co-owners own undivided interests; but unlike joint tenancy, these interests need not be equal in quantity and may arise at different times. There is no right of survivorship; each tenant owns an interest, which on his or her death vests in his or her heirs or devisee.
  Example: John Doe, a single man, as to an undivided 3/4th interest, and George Smith, a single man as to an undivided 1/4th interest, as tenants in common.
• Trust
  Title to real property in California may be held in trust. The trustee of the trust holds title pursuant to the terms of the trust for the benefit of the trustor/beneficiary.

The preceding summaries are a few of the more common ways to take title to real property are provided for informational purposes only. There are significant tax and legal consequences on how you hold title. It is suggested that you contact an attorney and/or CPA for specific advice on how you should actually vest your title.

How long are title policies good for?

Forever, theoretically. If you are planning to resell the property within a couple years, ask about "binder" coverage. A binder is good for two years, often can be extended beyond that time, and the fee charged for the new buyer's policy will be the difference between what you bought the property for and the price at which it sold. In other words, you will get a credit for the amount of coverage you purchased under your own Owner's Title policy.

How often are title policy insurance premiums paid?

Once. The fee is due when you buy. You will never pay it again. Title policy insurance is the best insurance policy you can ever buy.

When does title insurance protection begin and end?

With the exception noted later, title insurance only protects against losses arising from events that occurred prior to the date of the policy. Coverage ends on the day the policy is issued and extends backward in time for an indefinite period. This is in marked contrast to property or life insurance, which protect against losses resulting from events that occur after the policy is issued, for a specified period into the future.