What is title insurance and why is it necessary? Title insurance is an insurance policy that ensures that you have marketable title to the property. Like any good insurance policy, it shows the amount of coverage that you have, so if you have a complete title failure or partial title failure, it’ll pay up to the dollar amount that’s shown on schedule A of your title insurance policy.
It also tells you the title to the property and has the legal description of the property on schedule A. There is a schedule B that says that there are certain matters that they don’t insure against which are called exceptions. Some of these exceptions reference such as easements, restrictive covenants, and conditions, those are just a few examples, which are usually acceptable to a buyer. What you need to be concerned about on your Schedule B of your title policy, is if there is a judgement or some sort of lien that’s shown in that, which you’re not insuring against.
That’s what title insurance does. It insures that you have marketable title, and if you’re notified that there is a lien against your property or another problem with the title, that you have someone to look at. The big reason why title insurance is necessary is more for preventative measure than it is a remedial measure. That then, you have someone who has examined the title to check to see if there’s any particular liens against the property, and so they are confident or have examined the title, and therefore will insure it, so that they, as they say, put their money where their mouth is, or the insurance policy itself.
Whenever you make a substantial investment, of hundreds of thousands of dollars, or one of the largest investments that you make, you’re usually not talking about a few hundred dollars, you’re talking about thousands of dollars. It would only be appropriate that you make sure that you know what you’re getting, and have the title searched, and have a title policy. This, in the Tampa Bay area, whenever you purchase real estate, the seller is usually the one that is responsible for paying the title insurance, that’s primary practice, and that’s shown in the real estate contracts, as to who is to pay for the title insurance.
If you go down to Miami and Broward county, and those counties, there the borrower is the one that’s responsible for paying the title insurance. It varies throughout the state as who’s responsible, and is controlled by contract. There’s also an aspect of it is that if you have … if the seller is paying for owner’s policy, and the buyer is getting a mortgage, the buyer can obtain what they call a simultaneous issue rate, to ensure your lender that the lender’s getting a first lien on the title, and that there’s no junior liens. The title insurance is important to the lending community, to make sure that they have first liens, and not just rely on an attorney’s opinion or an ownership and encumbered search, an attorney’s opinion, because, let’s say that the lawyer missed something or the title company or whoever issues the ownership and encumbered search missed something. Who they going to hold responsible? Go back to the lawyer, does the lawyer have the ability to pay the money, is he still in business, has he died or whatever. Therefore, we have the advent of title insurance, which has been around for longer than I’ve been … I’m not sure just how long, but it’s been here a long time, 50, 60, 70 years.
You have any number of major title insurance underwriters. It’s primarily preventative, because you do thousands of transactions and the property sells and resells and there’s no title problems, but you’re checking on them, such as code enforcement liens, should show up on a title search, and that way you take care of it before you take title. Otherwise, if you just take a deed to the property and trust the seller that he says, “Oh, no, I don’t have any liens against it.” Later on, you find out, what are you going to do about it? That’s the reason why you want to have title insurance and hopefully give you some idea of what title insurance does.
If you have any questions, or more importantly, if you like for me to write some title insurance or write a contract and write the title insurance policy, I’ll be happy to do so, give me a call at 727-847-2288.