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Making sure your home is legally yours

With all the hoops you have to jump through to buy a home, you'd think that would be enough to prove your home is indeed your home. But alas, such is not always the case. A myriad of situations can stand between you and a marketable title -- a condition that states evidence of your problem-free ownership rights to a particular property.

The purpose of title insurance is to secure your legal claim to the property and protect you against title "defects"--legal rights to a property claimed by somebody else. Unfortunately, hidden defects can surface even after you've gone through closing, and a myriad of situations can stand between you and a marketable title. With title insurance, the title insurer not only pays the costs if you're ever forced to defend your ownership in court, but also covers any financial loss if the title defects can't be settled.

To get a mortgage you'll have to buy a lender's title insurance policy. This protects the lender against any title problems. But to protect your interests, you'll need owner's title insurance, as well. Keep reading this page for valuable information about:

Use your real estate attorney's title expertise.

Many companies sell title insurance. But a lay title agency (one that's not affiliated with a law firm) only prepares documents for closing and issues your title insurance policy.

A lay title agency cannot:

  • Prepare contracts
  • Resolve title or inspection issues
  • Give you legal advice regarding the content of documents you sign during the closing

Since your ownership rights must be legally protected, a person trained in the complexities of real estate law is best qualified to issue your owner's title insurance policy. That's your real estate attorney. Since the fee for title insurance will be about the same with or without a real estate attorney, it just makes sense to get the added value of an attorney's legal advice and counsel.

What happens if defects are found?

A title search involves learning the legal history of a property. This is done by researching the public records to disclose the previous owners of record, prior deeds, mortgages, court judgments, proceedings and divorces, foreclosures, tax and construction liens, and other things that can affect title.

If a title search reveals obvious defects, you can ask the seller to undertake legal proceedings to clear them up. Or, you can withdraw from the deal.

There are also hidden defects which may not surface even in the course of a thorough title examination. One of these could put your ownership of the property in question even after you've closed, which is why title insurance is so critical. Your real estate attorney can help you rectify any problems down the road that occur as a result of these hidden defects. Some examples of hidden defects include the following:

  • Lost or forged deeds
  • Married seller who represents himself or herself as single
  • Claims of undisclosed heirs
  • Impersonation of another
  • Clerical errors by courthouse clerks
  • Incorrect legal description of property
  • Contracts signed by minors or mentally incompetent persons
  • Improperly probated will
  • Confusion of title resulting from similar names

The purpose of title insurance is to protect against these types of defects. The title examination, by a trained professional, is the first line of defense--and protection. The title insurance policy is the second line of protection for everything the title exam would not have revealed (hidden defects).

Know the "exceptions" to your title.

As part of the title search, your real estate attorney will list any title exceptions. Exceptions are situations where the title owner relinquishes control over a given aspect of the property, such as a shared driveway.

If you want to object to these exceptions, you have a specified amount of time to do so. And the seller has time allotted to resolving the exceptions. If the issues can't be resolved, the buyer can legally get out of the purchase contract.

If you don't have a real estate attorney, you won't know anything about the exceptions, you won't know to object to them, and you won't get clarification about why they're necessary.

Do you need more coverage?

Ask your attorney if you'll need special endorsements to supplement your standard title policy. This extended coverage is used most often to protect owners of condominiums and planned unit developments (PUDs), but many different types of endorsements are used for a variety of reasons.

One-time cost.

You can expect to pay a one-time charge ranging from a few hundred to over a thousand dollars, depending on the sale price, for owners title insurance at closing. Unless you refinance your loan, this is the only time you'll have to pay this premium.

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