Which Title Insurance Policy?

With waterfront properties, REO properties, short sales and the constant question of mechanic’s and material men’s liens, agents are often left with the question: how much coverage is the right amount for my buyer? 

Most REO sellers and builder sellers will only pay for a Standard Coverage Policy, to which the title company will attach a ‘homeowner’s additional protection endorsement’ for no additional charge. This, like all of our policies is an ALTA policy. For most buyers, this is all the coverage they will ever need. It includes coverage for instances where someone has a lien on your property; someone else owns an interest in your title; and your title is defective. These three covered items are going to protect your buyer from liens and from people claiming that they still own the property after it was foreclosed. 

The ALTA Homeowner’s Policy is the default policy provided by the NWMLS because it provides the best coverage for your buyers. The Homeowner’s Policy protects against 32 risks associated with homeownership, including many never covered before in any Standard Title Policy. This policy typically costs 10% more than the Standard Policy and may not be available on all homes. 

The third policy option available to your buyer is the Extended Coverage Policy. As the name indicates, it covers more than the Standard Coverage Policy, but it comes with an expensive requirement: your buyer must provide the title company with an ALTA as-built survey which will set them back thousands of dollars. This policy is typically reserved for commercial transactions for large apartment complexes and strip malls, but is available for residential purchases. This policy typically costs 35% more than the Standard Coverage Policy, with a minimum additional charge of $500 + tax. 

If you have questions about which insurance policy is best for you, feel free to talk with your Title company representative.

Today's blog courtesy of Lauren Yost, Chicago Title Company.

Happy Investing!

Title Insurance - Who Pays?

Owner's Title Insurance - State Exam Considerations

1. Premium Payment - The premium payment for title insurance CAN BE NEGOTIATED between the buyer and seller.

a. Seller Pays - If the seller is to pay the premium, the payment by escrow would be taken out of the seller's statement as debit entry. There would be no entry on the buyer's statement.

b. Buyer Pays - If the buyer is to pay (the usual case), it is a debit entry on the buyer's statement. There would be no entry on the seller's statement.

Everything is negotiable in real estate!

Happy Investing!

Why Get Title Insurance

What Does Title Insurance Protect Against?

-False impersonation of the true owner of the property

-Forged deeds, releases or wills

-Undisclosed or missing heirs

-Instruments executed under invalid or expired power of    attorney

-Mistakes in recording legal documents

-Misinterpretations of wills

-Deeds of persons of unsound mind

-Deeds by minors

-Deeds by persons supposedly single, but in fact married

-Liens for unpaid estate, inheritance, income or gift taxes

-Fraud

How Could There Be A Problem If The Title Has Been Searched?

Title insurance is issued after a careful examination of copies of the public records. Even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners.  In addition to matters shown in the public records, other title problems may exist that cannot be disclosed in a search. 

The Lender Is Getting A Policy, Why Do I Need One?

The lender's title policy protects the lender against loss due to unknown title defects.  It also protects the lender's interest from certain matters which may exist, but not be known at the time of sale.  This policy only protects the lender's interest.  It does not protect the borrower.  That is why an owners policy is necessary, which can be issued at the same time as the lender's policy for a nominal one-time fee.

What Protection Does Title Insurance Provide Against Defects And Hidden Risks?

Title insurance will pay for defending against lawsuits attacking the title as insured and will either clear up title problems or pay the insured's losses.  For a one-time premium, an owner's title insurance policy remains in effect as long as the insured or their heirs retain an interest in the property, or have any obligation under a warranty in any conveyance of the property.  Owner's residential title insurance, issued simultaneously with a lender's policy, is the best title insurance value you can get.

What This Means to the Title Insured.

The peace of mind in knowing that the investment they have made in their home is a safe one.

Happy Investing!

Today's blog courtesy of Sandy Andersen with Chicago Title Insurance Company

Clean Title

Many Brokers in our state will order a title commitment at the time of listing a property for sale. That is a very good practice. However, if you as a broker are not aware that the minute that you receive that title commitment that it is out of date, you may be in for a great surprise. Title commitments are living breathing documents and may change after they are published. A story will illustrate my point.

Our office was asked to assist a seller to remove an easement from their property. It was not a short sale. It was merely a normal purchase and sale and the seller agreed to eliminate a burdening easement from their property prior to closing. The Listing Broker referred them to our office. Life was good.

The sellers walked in armed with a title commitment in hand giving us the information we needed to start the necessary actions to eliminate that easement from the title.  However, upon seeing that title commitment, my assistant asked for  copy and immediately called the title officer at the title company that issued the commitment and asked whether that title commitment was current and sought a “date-down supplemental” from that title company for which the company promptly provided that necessary information by fax to our office.

As I was reviewing the information provided by my assistant, I discovered a number of interesting things:

A.      The title commitment that the seller brought in was dated about 7 months earlier and had been replaced by a new commitment two months ago.

B.      There had been a series of supplementals eliminating certain matters from even the new updated title commitment.

Upon review, (even before I walked in to meet the seller whom I had never met before), I was surprised to see that Title Exception Paragraph 5, which was the paragraph containing the easement, was eliminated by a Supplemental!

I asked my assistant to tell the sellers I would be delayed as I needed to talk with the title officer at that title company. To cut to the chase, the title company independently had discovered that the pesky easement, that was going to be the source of our engagement, had expired according to its terms and they had eliminated that easement as an exception to the title.

As I walked into the meeting with the seller, I had to inform them that they had wasted a trip to our office as the matter of the easement had already been eliminated by the title company. They were, of course, pleased. However, they were also a bit distraught as their broker had received a copy of that title update literally a month earlier and they had not been advised.

WHAT HAPPENED? The Broker received it, but did not read it and, as a result, his seller expended useless time and effort.

More importantly, what would have happened if WE had not obtained an updated title commitment? We may have started doing a whole heck of a lot of work and the seller may have spent a lot of money uselessly.

PRACTICE POINTER:  Whenever you receive a title report that isn’t fresh out of examining, call the title officer whose name is on the commitment and get a date-down supplemental and ask to be included in the distribution of any further updates. It is just good practice.

Happy Investing!
Today's blog courtesy of McFerran & Burns

Title Insurance for Seller-Financed Deals

Prior to the 1950's most real estate was sold and purchased using some form of seller financing.

Although the secondary mortgage market and quasi-governmental entities such as FNMA and FHLMC virtually created the modern real estate industry we know today, occasionally sellers will still choose to "carry the paper" and finance a sale of their real estate. Sometimes these transactions are among family members or friends. But occasionally, such as now, when interest rates are very low, owning a note and deed of trust from a credit worthy purchaser may give the seller a good source of interest income that may not otherwise be available to them. These loans may in some cases be saleable to third parties as well in the event the seller decides they need their money before the note becomes due.

Today, the typical security instrument that would be used to secure such a residential transaction would be a deed of trust. The deed of trust is usually the preferred security instrument because in the event things do not work out as planned, and the purchaser defaults on the loan, the seller can either get their money or get the property back in as little as 190 days from the date of default until the date of the trustee's sale. The seller should seek legal advice to be certain the deed of trust is in fact the best and most appropriate instrument for their use.

When the sale to the purchaser closes, the seller can obtain a standard coverage title insurance policy in a typical sale transaction for $250.00 plus sales tax. This policy insures the condition of title at the time of the sale subject to the terms and conditions of the policy. The policy will insure the seller that there are no matters against the purchaser of the property existing prior to the recording of the deed of trust that might have priority over the seller's deed of trust in the event the seller is forced to foreclose on the property. Generally, the title insurance company will decline to issue extended coverage to the seller in these instances. Although extended coverage insures against certain off record matters such as mechanic's liens and encroachments, the policy generally excludes matters created or suffered by the insured.

Happy Investing!


Today's guest blog was courtesy of Sandy Andersen with Chicago Title Insurance Company of Washington

What is Title Insurance?

Today's guest blog was submitted by First American Title representative Julie Satko.

Title Insurance… What is it?

Title is a bundle of rights in real property. Protecting purchasers and lenders against loss is accomplished by the issuance of a title insurance policy. Usually, during a purchase transaction the lender requests a policy (commonly referred to as the Lender’s Policy)while the buyers receive their own policy (commonly referred to as an Owner’s Policy).

In short, the policy states that if the status of the title to a parcel or real property is other than as represented, and if the insured (either the owner or the lender) suffers a loss as a result of a title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy subject to exceptions and exclusions contained in the policy.

Who is covered?

Typically there are two (2) policies issued. The Lender’s Policy insures the lender for the amount of the loan. The Owner’s Policy insures the purchaser for the purchase
price.