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A Better Future Can Start Today
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What Is Title Insurance and Why Do I Need It Anyway?
If you are interested in joining the ranks of successful women in real estate, it is important
that you come to a complete understanding of the fundamental elements associated with
real estate investing. Yes, few people find the intricacies of title insurance exciting and
many feel it's downright boring. However, if professional women have learned anything
over the course of the past few decades, it is that knowledge is power. In this regard, one
of the most important elements of the real estate investment process is to understand
how title insurance works.
So, read on and learn.
Title insurance is exactly as it sounds. It insures you in case that at some later date, a
recorded or unrecorded document surfaces that can affect the title of the property you
purchased. Putting it simply, a title insurance policy insures the ownership of the property
and protects you as the owner.
Before providing a title insurance policy, the title company examines, summarizes and
classifies every document affecting the property and its previous owners. Highly skilled
title searches assemble this material and forward the results to a title officer. The title
officer or examiner then writes an opinion on the title. The opinion will initially take the
form of a preliminary title report and ultimately become a policy of title insurance.
Although title insurance is designed to protect a purchaser of real estate against title
defects that are discovered after that individual takes title to a piece of property, the real
work of a title insurance company is actually undertaken in advance of the closing on the
sale itself. After a real estate sales contract is executed between a seller and purchaser,
a preliminary title search is performed and then a policy of title insurance is obtained.
This means that the title insurance officer physically evaluates the deed to the property
and then reviews all of the liens and encumbrances that have been filed against that
deed over time. This effort by the title insurance company is designed to ascertain that
any liens or other encumbrances that may have been placed against the property in the
past have been released.
Any liens or encumbrances remaining on the deed or title to the real estate subject to
sale will prevent the buyer from obtaining a "clear" title because every questionable item
recorded on title is classified as a defect or "cloud" on title. One of the essential clauses
in real estate sales contracts requires the buyer to deliver "clear" title of the property to
the purchaser by a certain date. Therefore, the title insurance company will take all
necessary steps to clear up any "clouds" on title within the time frame mandated by the
contract for the sale of the property.
As mentioned, if for some reason there is a defect on title -- a lien or encumbrance not
discovered before the new deed is recorded -- the title insurance company is responsible
for any loss sustained by the real estate purchaser because of that title defect. In most
instances, the loss sustained amounts to legal fees and court costs associated with
taking action to clear the defect. If the purchaser or real estate investor does not have
adequate title insurance, she is the one who sustains the loss. This is why it is vital to
forgo standard title insurance and invest in extended coverage policies with every one of
your transactions.
Top SEVEN ways your property can be put at risk:
Your property can be put at risk in a variety of ways. If your property does not have clear
title, any questionable recorded or unrecorded documents may have been executed
many years before, yet surfaced much later. In this case, know that you are protected by
title insurance. Below are seven common items that can put your property at risk.
1. Forged deeds, mortgages, satisfactions or releases
2. Deed by person who is insane or mentally incompetent
3. Deed by a minor
4. Deed from a corporation, unauthorized under corporate bylaw
5. Deed by partnership, unauthorized under partnership agreement
6. Deed given under fraud or duress
7. Deed executed under falsified power of attorney
Top SEVEN things to look for:
If any of the following items appear on the preliminary title report, you must take
immediate action. The first step is to contact your title company. Failure to investigate
any of the following may cause a significant delay in closing of escrow and/or decrease
your profit.
1. Tax Liens
2. Mechanics Liens
3. Notice of Action/Judgments (including back child support)
4. Bankruptcies
5. Uninsured Deeds
6. Legal Access to and from the subject property
7. Typos in the legal description and/or parties' names
Two Separate Policies
Nearly every sale of a residential property involves the purchase of two separate policies
of title insurance. One policy names the buyer as the interested party and the second
names the lender as the insured party.
It is customary for the seller to provide and pay for a title insurance policy on behalf of
the buyer. This is done so that the buyer can be assured that the property does indeed
belong to the seller and that there are no unexpected liens or encumbrances against it.
If the buyer borrows money to purchase the house, it is normally a requirement of the
loan that the buyer purchase title insurance on the lender's behalf for the amount of the
loan and sometimes for the amount of the entire sales price.
One-time Investment
The purchase of a tile insurance policy is a single purchase transaction. You pay one
premium, and the policy stays in force until you sell or refinance your property. There are
no recurring fees. Premiums for the title insurance policy are usually based on the
amount of risk assumed by the insurer. The liability is based on the sales price of the
property or, in the event of a lender's policy, on the amount of the loan.
In conclusion:
It would be to your benefit as a woman investing in real estate to have a working
relationship with a helpful and motivated title representative whose sole purpose is to sell
title policies on behalf of his or her employing title insurance company. Find out what he
or she is willing to do in order to earn your business.
Will the company allow you access to their public record database?
Can you request and receive copies of recorded documents?
Will the company create property profiles for your hot deals?
Can the company set up a farm (territory) to help you generate leads?
Ask ahead of time. A good working relationship with a title insurance company enables
you to conduct business efficiently. In simple terms, everyone investing in real estate
must know the specifics and the complexities of title insurance and the benefits of
building a solid relationship with a good title representative.
Brenda Coté is a Real Estate Investor, Real Estate and Mortgage Broker, Mentor, and
Wealth Coach. At Transforming Lives, Creating Wealth, Brenda employs a "whole
person" approach to support female Real Estate Investors succeed in business and life.
To download Brenda's FREE audio workshop, "The Seven Elements of a
Wealth-Creation Mindset" please go to: http://www.TransformingLivesCreatingWealth.com
Contact the Author
Brenda Cote
Wealth Building/Real Estate Investing
More Details about Wealth Building Coach here.
If you are interested in joining the ranks of successful women in real estate, it is important
that you come to a complete understanding of the fundamental elements associated with
real estate investing. Yes, few people find the intricacies of title insurance exciting and
many feel it's downright boring. However, if professional women have learned anything
over the course of the past few decades, it is that knowledge is power. In this regard, one
of the most important elements of the real estate investment process is to understand
how title insurance works.
So, read on and learn.
Title insurance is exactly as it sounds. It insures you in case that at some later date, a
recorded or unrecorded document surfaces that can affect the title of the property you
purchased. Putting it simply, a title insurance policy insures the ownership of the property
and protects you as the owner.
Before providing a title insurance policy, the title company examines, summarizes and
classifies every document affecting the property and its previous owners. Highly skilled
title searches assemble this material and forward the results to a title officer. The title
officer or examiner then writes an opinion on the title. The opinion will initially take the
form of a preliminary title report and ultimately become a policy of title insurance.
Although title insurance is designed to protect a purchaser of real estate against title
defects that are discovered after that individual takes title to a piece of property, the real
work of a title insurance company is actually undertaken in advance of the closing on the
sale itself. After a real estate sales contract is executed between a seller and purchaser,
a preliminary title search is performed and then a policy of title insurance is obtained.
This means that the title insurance officer physically evaluates the deed to the property
and then reviews all of the liens and encumbrances that have been filed against that
deed over time. This effort by the title insurance company is designed to ascertain that
any liens or other encumbrances that may have been placed against the property in the
past have been released.
Any liens or encumbrances remaining on the deed or title to the real estate subject to
sale will prevent the buyer from obtaining a "clear" title because every questionable item
recorded on title is classified as a defect or "cloud" on title. One of the essential clauses
in real estate sales contracts requires the buyer to deliver "clear" title of the property to
the purchaser by a certain date. Therefore, the title insurance company will take all
necessary steps to clear up any "clouds" on title within the time frame mandated by the
contract for the sale of the property.
As mentioned, if for some reason there is a defect on title -- a lien or encumbrance not
discovered before the new deed is recorded -- the title insurance company is responsible
for any loss sustained by the real estate purchaser because of that title defect. In most
instances, the loss sustained amounts to legal fees and court costs associated with
taking action to clear the defect. If the purchaser or real estate investor does not have
adequate title insurance, she is the one who sustains the loss. This is why it is vital to
forgo standard title insurance and invest in extended coverage policies with every one of
your transactions.
Top SEVEN ways your property can be put at risk:
Your property can be put at risk in a variety of ways. If your property does not have clear
title, any questionable recorded or unrecorded documents may have been executed
many years before, yet surfaced much later. In this case, know that you are protected by
title insurance. Below are seven common items that can put your property at risk.
1. Forged deeds, mortgages, satisfactions or releases
2. Deed by person who is insane or mentally incompetent
3. Deed by a minor
4. Deed from a corporation, unauthorized under corporate bylaw
5. Deed by partnership, unauthorized under partnership agreement
6. Deed given under fraud or duress
7. Deed executed under falsified power of attorney
Top SEVEN things to look for:
If any of the following items appear on the preliminary title report, you must take
immediate action. The first step is to contact your title company. Failure to investigate
any of the following may cause a significant delay in closing of escrow and/or decrease
your profit.
1. Tax Liens
2. Mechanics Liens
3. Notice of Action/Judgments (including back child support)
4. Bankruptcies
5. Uninsured Deeds
6. Legal Access to and from the subject property
7. Typos in the legal description and/or parties' names
Two Separate Policies
Nearly every sale of a residential property involves the purchase of two separate policies
of title insurance. One policy names the buyer as the interested party and the second
names the lender as the insured party.
It is customary for the seller to provide and pay for a title insurance policy on behalf of
the buyer. This is done so that the buyer can be assured that the property does indeed
belong to the seller and that there are no unexpected liens or encumbrances against it.
If the buyer borrows money to purchase the house, it is normally a requirement of the
loan that the buyer purchase title insurance on the lender's behalf for the amount of the
loan and sometimes for the amount of the entire sales price.
One-time Investment
The purchase of a tile insurance policy is a single purchase transaction. You pay one
premium, and the policy stays in force until you sell or refinance your property. There are
no recurring fees. Premiums for the title insurance policy are usually based on the
amount of risk assumed by the insurer. The liability is based on the sales price of the
property or, in the event of a lender's policy, on the amount of the loan.
In conclusion:
It would be to your benefit as a woman investing in real estate to have a working
relationship with a helpful and motivated title representative whose sole purpose is to sell
title policies on behalf of his or her employing title insurance company. Find out what he
or she is willing to do in order to earn your business.
Will the company allow you access to their public record database?
Can you request and receive copies of recorded documents?
Will the company create property profiles for your hot deals?
Can the company set up a farm (territory) to help you generate leads?
Ask ahead of time. A good working relationship with a title insurance company enables
you to conduct business efficiently. In simple terms, everyone investing in real estate
must know the specifics and the complexities of title insurance and the benefits of
building a solid relationship with a good title representative.
Brenda Coté is a Real Estate Investor, Real Estate and Mortgage Broker, Mentor, and
Wealth Coach. At Transforming Lives, Creating Wealth, Brenda employs a "whole
person" approach to support female Real Estate Investors succeed in business and life.
To download Brenda's FREE audio workshop, "The Seven Elements of a
Wealth-Creation Mindset" please go to: http://www.TransformingLivesCreatingWealth.com
Contact the Author
Brenda Cote
Wealth Building/Real Estate Investing
More Details about Wealth Building Coach here.
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