Frequently Asked Questions

Q: What is "title"?

A: "Title" is the foundation of ownership of property. It means that you have a legal right to possess that property and to use it within the restrictions imposed by authorities or limitations on its use ú superimposed on the basic rights to possession by previous owners.

Q: What is the purpose of title insurance?

A: Title insurance is the application of insurance principles to hazards inherent in real estate titles. The safety of your investment and the security of your home are largely dependent upon the soundness of the title to the land upon which your home is built. Millions of dollars are involved in title disputes every year. When you consider this and the fact that the largest and most important investment you will probably ever make is your home, certainly you will agree that it is a wise precaution to safeguard the security of your investment.

Q: What is meant by a title defect?

A: A title defect is anything in the entire history of ownership of a piece of real estate which may encumber the owner’s right to "peaceful enjoyment" of the property or which may cause the owner to lose any portion of the property.

Q: Why should I protect the home I buy with title insurance?

A: Because without title insurance you become a self-insurer. This is inadvisable unless you are in a financial position to lose the money you have invested in your home without upsetting your financial condition in anyway.

Q: Why won’t a General Warranty Deed fully protect me?

A: With a General Warranty Deed the grantor can pass on to the grantee only such title as he or she holds. It is true that if title fails, the purchaser may have, under some circumstances, a cause of action against the grantor, but the chance of recovery is dependent entirely upon the financial ability of the grantor to pay. Title insurance is a corporate guarantee of a company operating under the rules and regulations of the insurance commission or other state agency. The security afforded by any policy is controlled by the integrity and financial structure of the company issuing the policy.

Q: The contract I signed makes the sale subject to the title to the property’s being good. Doesn’t that protect me?

A: Only superficially. The seller cannot be sure that the title is good. Even a perfect-looking title can be seriously flawed because of hidden defects. Then if anything should happen to defeat your title, your cause of action would be against the seller. Your chance of recovery would depend upon your finding and suing the seller, winning the lawsuit, and finally, upon whether or not the seller was financially able to pay the judgment. In any event, your attorney’s fees and expenses would be a loss to you.

Q: After I retain an attorney, can’t I be assured that my title is good?

A: Every attorney knows that there are hazards in real estate titles that cannot possibly be discovered with even the most diligent search of the public records. For instance, the attorney cannot necessarily determine from the public records: whether the marital rights of all previous owners have been properly relinquished; that all mortgages, judgments, etc., affecting the property have been properly indexed in the records; that all signatures on all recorded documents are genuine; that no unknown heir of a former owner can appear to assert his or her claim. These are but a few of the problems that can crop up to defeat real estate titles, others include circumstances such as fraud, duress, infancy, insanity, false personations, etc.

Q: Is title insurance as important as fire insurance?

A: Yes, because your losses without title insurance can be greater than fire losses. If a house burns, the land is still there upon which you could rebuild. However, if the title to the property fails, you lose the house and the land and are left with nothing. This is why owner’s title insurance is always written to cover the value of the house and the land it sits on.

Q: Does title insurance protect the safety of my investment and the security of my home?

A: Yes, although title insurance cannot eliminate title defects any more than fire insurance can eliminate fire. However, title insurance (1) assures you of the best possible legal defense if the title to your property is attacked, and (2) reimburses you up to the face amount of the policy if the title, or any part of it, should fail.

Q: Does the title insurance premium cover the fee for searching title?

A: No. The insurance premium is the fee for the title insurance policy that protects your home in case of title defects, whereas the fee for searching title is the cost of labor for researching the title to your property. In some areas a “package rate” may be charged which includes attorney’s or abstractor’s search fees as well as the title insurance premium. The entire “package rate” is then referred to as “title insurance.” It is well to remember that if a title search fee is not shown as such on your closing statement, the “title insurance” charge probably covers the search fee plus the title insurance premium.

Q: When I buy a home and protect it with title insurance, what happens in the event someone should challenge my ownership of the property five or ten years after the purchase?

A: You simply must notify the title insurance company, which in accordance with the terms of the policy, undertakes the defense of your title at its expense. If the claim reaches the courts, the title company retains attorneys and bears the expense of defending the suit. This is true whether your period of ownership is a day or a generation or more.

Q: If the person I am buying from has title insurance, why do I also need it?

A: The first and most obvious reason is that the previous owner could, in a very short time, do all sorts of things to encumber the title. Among other things, he or she could grant easements across the land or construct improvements that encroach on adjacent property. Furthermore, the deed into the new purchasers could be fatally defective because of forgery or incompetence or any number of other circumstances. In addition, if a title defect arises you would have to take action against the grantor under the terms of the deed to you. In that case, as an insured, the title insurance company would represent the defendant in your action.

Q: How does title insurance help protect my home investment?

A: It places the assets of a corporation behind the title to your home. If attacked, the title will be defended without cost to you and if the title, or any part of it, should be defective, you will be reimbursed, up to the face amount of your policy, for any financial loss incurred.

Q: Do many people actually lose their homes because of title defects?

A: Not if they have title insurance. Title companies realize how important it is to homeowners to keep their homes. Therefore, when an insured title is found to be defective, the title company does everything possible to perfect the title. Often it is necessary for the insurance company to purchase a claimant’s rights in the property and transfer them to the insured. This is practically always possible when only a partial interest is outstanding.

Q: Are all titles insurable?

A: No indeed. Title insurance companies must turn down some applications. Just as fire insurance companies will not insure fire traps and life insurance companies will not insure seriously sick persons, a title company will not insure a “sick” title. This is one of the great values of title insurance service. If the title is uninsurable, then it is usually in such a “sick” state that no prudent purchaser would want it. If the contract specifies that a sale is contingent on good title being passed onto the purchaser, the buyer is not obligated to purchase property with an uninsurable title.

Q: What are the various ways I can take title to property?

A: There are innumerable ways in which the title, or ownership, or real estate may be held. A brief overview of three very common types of ownership and certain characteristics of each of these types are set forth below: Tenancy by the Entireties – This manner of holding title is only possible between a husband and wife and is extinguished upon a divorce, after which the parties hold title as Tenants in Common. Tenancy by the Entireties includes a right of survivorship, which that upon the death of one spouse, the survivor then is the sole owner of the property. During ownership, neither spouse may sell or mortgage their interest acting alone. Judgment or liens against only one spouse do not attach to the property held as Tenants by the Entireties. Joint Tenancy – This form of ownership requires two or more persons, who need not be related to one another. Joint tenancy includes a right of survivorship, such that upon the death of any joint tenant, the survivors succeed to the interest of the deceased. This type of tenancy also differs from Tenancy by the Entireties in that any owner may sell or mortgage his or her respective interest or share, but this may extinguish the Joint Tenancy thereby creating a Tenancy-in-Common as to that interest. Judgments and liens attach to the respective owner’s share. This is a popular choice for related, but not married, persons who wish to provide a right of survivorship among themselves. Tenancy-In-Common – This is simply ownership of property by two or more owners, each with a fractional interest in the whole. There is no right of survivorship. Upon an owner’s death, his or her interest passes to the heirs and/or devisees of that owner. Each owner may sell or mortgage his or her share without the joinder of the remaining owners. Judgments and liens attach to the respective owner’s share. Note – Trusts, Partnerships, Life Estates, Corporations, Beneficiary Deeds, etc. have not been discussed. The foregoing is intended to generally address only the most frequent issues among individuals purchasing residential property. This should not be considered complete. You should consult an attorney for any advice regarding ways of holding title and its specific effects.