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Title Insurance Questions

General FAQs

If I have Title Insurance, do I also need legal advice?


We Encourage you to seek legal advice. The Title Insurance policy does not take the place of legal counsel. In every real estate transaction there are many matters not covered by your policy. The coverage of the policy itself, and the specific exclusions therefrom, your rights and obligations as a seller or purchaser, the tax consequences of your transaction — we recommend that these and many other issues should all be fully discussed and explained by a qualified attorney.




What is Title Insurance?


Title Insurance is the modern method of real estate title protection. A policy of title insurance protects the insured against a partial or total loss arising out of defects, liens and encumbrances in the title to real estate.




Why do I need Title Insurance?


Under our American system, any interest in land must be recorded in the public records if the holder of that interest wants to be protected. Once it has been so recorded, all subsequent parties are presumed to know of its existence, since it is on the public record for all to see. Therefore, the public records must be thoroughly searched in order to determine the ownership of any piece of land at any given time, and in order to know whether there are any mortgages, liens or other encumbrances outstanding against it. Out of the millions of documents on record, it is imperative that a prospective buyer or lender find all those which affect the title to his/her particular parcel. Obviously, this is a job for experts who specialize in this field. Their carefully prepared, meticulously maintained indexes, and their highly trained, skilled personnel, enable them to make a thorough search of the records in a fraction of the time it would take a layman and to certify their findings to the prospective buyer or lender. Unfortunately, however, there are many possible defects in the title, such as forged documents, documents executed by legal incompetents, etc., which even the most painstaking search of the records would not disclose. Consequently, the ultimate protection is a policy of title insurance.




What is the difference between an Owner’s Policy and a Mortgage Policy? Why do I need both?


An Owner’s Policy protects the interest of the owner of real estate and lists the name(s) of the new buyer as the insured party. As the new buyer, you will want assurance from the seller that the title is marketable and free from liens that could create problems in the event you should decide to sell or refinance the property in the future. The Owner’s Policy does assure that the title is marketable and provides for defense of the title at the expense of the insurance company, if it is challenged or questioned by others. The Owner’s Policy is mailed directly to the new owner, unless otherwise specified. A Mortgage Policy protects the interest of the mortgage lender and lists the lender as the insured party. All lenders require the borrower to provide proof and assurance that the loan being applied for will be in the correct lien position. If the validity of the lien of the mortgage is challenged or questioned, the policy provides for defense of the mortgage interest. The Mortgage Policy is mailed directly to the lender. The Difference The Owner’s Policy is always in the full face amount thereof, and continues as long as the owner or his/her heirs have an interest in the property, while the Mortgage Policy protection terminates immediately when the loan is paid off.




What defects are insured against?


Your title policy will protect you against any defects, not excluded from the coverage of the policy, which cause actual loss or unmarketability of title. Such defects include errors in description, errors in searching the public records, unpaid taxes, legal incompetency of parties, fraud, forgery, outstanding dower rights, defects in the execution of instruments, and many others.




How am I protected if a claim arises?


Under the terms of your policy the underwriter may, at its own expense, defend you against any adverse claim or legal action arising out of any encumbrance or other defect insured against, and may also indemnify you against any loss resulting therefrom up to the face amount of the policy.




What is the cost of Title Insurance?


The cost depends upon the face amount of the policy issued. The face amount is normally the market value of the real estate in the case of an Owner’s Policy, and the amount of the loan in the case of a Mortgage Policy. Only one premium is paid and the protection lasts as long as the insured has any interest in the property. When property is transferred or sold at a later date and an existing Owner’s Policy is surrendered, an Owner’s Policy will be issued protecting the new purchaser at a reduced premium. When an owner’s Policy and Mortgage Policy are issued simultaneously on the same land, special reduced rates are applicable. Reputation First Title Agency… Meeting the needs of our customers is not just our goal — it’s our promise! We at Reputation First Michigan Title Insurance Agency strive to offer only the best in customer service. Whether you are buying, selling or refinancing your home, the steps involved in a real estate transaction can be confusing. Our experienced staff at any of our offices can help eliminate any confusion you may feel by assisting you with any concerns, questions or suggestions you may have. Note: In this area it is customary for the seller to incur the cost of the Owner’s Policy and the buyer to incur the cost of the Mortgage Policy.





What is Title Insurance

What is title insurance?


An insurance policy – protecting against loss should the condition of title to land be other than as insured.




Why do I need title insurance?


When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights you bargain for.




What if I have a problem? Do I have to lose my property to make a claim?


Not at all. At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. Title insurance includes coverage for legal expenses which may be necessary to investigate, litigate or settle an adverse claim.




What does this cost?


The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property.




If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?


The lender’s policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender’s ability to foreclose and recover its principal and interest. And, in the event of a claim there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner’s policy is a bargain.




Can you be a little more specific about the types of claims, or risks, covered by title insurance? A: Sure. First understand there are basically three different levels of coverage: Standard coverage, extended coverage, and our most comprehensive “EAGLE Policy” coverage.


Standard coverage handles such risks as: Forgery and impersonation; Lack of competency, capacity or legal authority of a party; Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner); Undisclosed (but recorded) prior mortgage or lien; Undisclosed (but recorded) easement or use restriction; Erroneous or inadequate legal descriptions; Lack of a right of access; and Deed not properly recorded. An extended coverage policy may be requested to protect against such additional defects as: Off-record matters, such as claims for adverse possession or prescriptive easement; Deed to land with buildings encroaching on land of another; Incorrect survey; Silent (off-record) liens (such as mechanics’ or estate tax liens); and Pre-existing violations of subdivision laws, zoning ordinances or CC&R’s.





Glossary of Terms

Amortization Schedule:


A schedule showing the principal and interest payments throughout the life of the loan.




Appraised Value:


An option of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.




Credit Report:


A report on the past ability of a loan applicant to pay installment payments.




Document Preparation:


A fee charged by an attorney for preparation of legal documents for a transaction.




Escrow Fee:


A fee charged by the title company to service the transaction, to escrow moneys, and to cover the documents. The amount varies with each company, usually split between buyer and seller.




Escrow/Impound Account:


Funds held by the lender for payment of taxes, insurance or other periodic debts against real property. Usually does not include maintenance fees.




Homeowner’s Insurance:


Includes the coverage of Hazard Insurance plus added coverage such as personal liability, theft away from the home (items stolen from the insured’s car), and other such coverage.




Inspections:


An examination of property for various reasons such as, termite inspections, inspection to see if required repairs were made before funds are disbursed, etc.




Interest:


Rate charged for the use of loan funds. Most often paid in arrears.




Loan Application Fee:


Paid to the lender at time of application; check with lender for amount.




Loan Discount:


The points a lender charges; may be paid by either buyer or seller on conventional loans; number of points fluctuates with mortgage money market.




Maintenance Fee:


As applied to condominiums and planned developments, the amount charged each unit owner to maintain the common area. Usually a monthly fee as part of the budget.




Mortgagee’s Title Policy:


Insures the lender’s lien; does not protect the buyer.




Origination Fee:


A fee made by a lender for making a real estate loan. Usually a percentage of the amount loaned, such as one percent.




Owner’s Title Policy:


Title insurance for the owner of property, rather than a lien holder.




Point:


1% of loan amount.




Prepayment Penalty:


A penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due.




Private Mortgage Insurance:


Insurance against a loss by a lender (mortgagee) in the event of default by a borrower (mortgagor).




Realtor Fees:


An amount paid to the real estate agent as compensation for his services.




Recording Fees:


Charged by the County Clerk to record documents in the public records.




Restrictions:


Certified copy of restrictions (in deeds of other recorded documents) required by lender.




Survey:


The measurements of the boundaries of a parcel of land, its area, and sometimes its topography.




Tax Proration:


To divide property taxes between buyer and seller proportionately to time of use, or the date of closing.




Tax Certificates:


Certificates issued by tax service showing the current year’s taxes, the last year the taxes were paid, and any delinquencies to be collected at closing.