When you decide to purchase a tract of land, a commercial property, or a new home, you must take into account many factors. Of course, your first consideration is the purchase price and the possibility of securing a mortgage which fits into your budget, but there are many more details that must be covered before you sit down at the conference table and begin signing your name on all the documents.
Title Search
The step is verifying true legal ownership of the property. You need to ensure that the person listed as the seller actually owns the property and has the authority to sell it. You can do this through a title search. Mortgage lenders require a title search before approving any loan. The local land title office manages a database of all the legal instruments filed in the county which affect property title. Those documents will include deeds (titles of ownership), deeds of trust (mortgage liens), legal property boundaries, easements, and mineral interests.
However, there are many other items which affect real estate property. There could be liens against it for numerous reasons, including unpaid subcontractors, curb and gutter assessments, unpaid back taxes, delinquent child support, or civil lawsuits. The title could be clouded by issues of divorce, probate, or heirship.
Title Insurance
Your lender will require a land title insurance policy to protect its financial interest in the transaction. As closing documents are being prepared, the seller and buyer can order title policies to protect their interests as well. A Title Insurance Policy is a document which guarantees that the underwriter (insurance company) will assume liability for financial losses and will, if necessary, defend you should any issues arise in the future which may question your legal title to the property. Before it issues the policy, the land title company will research the chain of title to be sure all outstanding interests have been cleared up before the property is deeded to the new owner.
Premium
The title insurance policy premium is not paid monthly or quarterly like some types of insurance. It is a one-time fee paid at closing after which you, the owner, are protected from legal challenges against the property for as long as you own it or as long as your heirs have an interest in it. It protects you against unforeseen issues which may have been missed during the title search and it assures you that the underwriter will protect you financially from things like fraud, clerical or filing errors, or mistakes in the ownership documents. Title insurance rates vary by state, but your title professional can explain the costs before closing documents are signed.
