THE TITLE INSURANCE

The Title Insurance is like insurance that you have on your car. In this case, an Underwriter is insuring that the house that you are buying is indeed the house that you are buying and that the sellers have the right to sell it to you. It is also insuring that the taxes have been paid and that there are no liens or encumbrances on the property.

The seller has the obligation to give you a Title Insurance Policy called an Owner’s Policy. This is a policy that will state your name as the owner, the legal description of the property (which is different than the address) and the Tax Number for the property. It will also state any exceptions on the policy. This is what is important as you want to make sure that there are no encumbrances. These would be brought up in the exceptions portion of the title.

To learn about Title Insurance can take all day. Your lender will also be getting a Title Insurance Policy that you will pay for. It is called the Lender’s Policy. It will insure their interest but have the same exceptions that you will have on yours. If there is anything amiss, the lender will want it removed from the Title Policy or insured over.

Some things that can be wrong with the title include:

Liens on the property

If the owner did not cut the grass and the municipality assessed a fine, it will be a lien on the property. If the owner purchased new siding and didn’t pay the installer, a lien will be on the property. You do not want these liens being on the property so you will tell the seller’s attorney to have them removed before you take title. You are entitled to clear title to the land, without liens.

Seller not of record

This means that the seller does not have the right to sell the property. The only way of knowing who is on the title to the property is to search the recorded deeds. This will give you the owners of the property all the way back until the property was built. The title company will reflect the current owner and if it is not the person who signed the contract, they will have to prove that they are legally entitled to sell the property.

Taxes not paid

Again, you are entitled to have clear title with paid taxes. The seller will have to provide proof of payment or the taxes will have to be paid from the proceeds of the sale.

Encroachment

This shows up on the Survey and on the title. This means that there is something encroaching on the property. It can be as simple as a neighbor’s fence or something as serious as a neighbor’s garage. It makes a difference if it is a permanent structure or a removable structure. The title insurance company will not insure the property that is encroaching on your property. This is the seller’s problem and they will have to ask for an endorsement over the encroachment.

Covenants and Restrictions

If these have been recorded against the property, you need to find out what they are and what they restrict. Some of the restrictions that can affect your ownership of the property would be if you could not have a shed outside, cannot park a boat or truck in the driveway, cannot erect a fence, cannot put on an addition, or other factors that can restrict your use of the property.
You should get a copy of the recorded instrument so you can see what, if anything, will affect you.

Mortgage on the property

All existing mortgages should be paid off before you take possession of the property. When a mortgage is paid off, the owner is sent a Release of Mortgage. This document is supposed to be recorded in the country where the property is located, but many people do not follow these instructions. There may be a mortgage on the property that is old and does not even belong to the current owners. Again, it is up to the seller to remove this from the property.

If you are unfamiliar with Title Insurance, you can have an attorney look over the Title Commitment. Even if you do not have the attorney come with you to the Closing, he or she can at least take a look at the title for a lower fee possibly.

Until next time…
Take care of yourself, and those around you!

TX Veteran,
REALTOR ROB

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