Title to Property
- Good title is the exclusive right to ownership and possession of property.
is possible that someone other than the owner has a legal/superior
right to the possession of the property (i.e. tenant, contract for deed,
lease purchase option, party in possession).
- Title insurance is similar to other types of insurance.
- Unlike other types of insurance, title insurance protects against loss due to events that took place in the past.
title insurance protects the buyer against loss resulting from
previously unreported or undiscovered title defects.
Why you need Title Insurance
you suffer a loss due to a title defect, the insurer will indemnify you
for a loss up to the face amount of the policy and any related legal
- If you improve the property and then lose it all, you cannot recover anything above the policy/purchase amount.
buying a property for $200,000 and building a $1,000,000 structure, you
want to increase your coverage to the ARV when closing or shortly
Two types of policies:
- Owner policy: provides for coverage to the owner.
- Lender policy: provides for coverage to the lender.
How Title Insurance Protects You
- Forged deeds, mortgages, satisfactions or releases.
- Deed from entity with unauthorized signer.
- Defect in chain of title.
- Adverse possession claims.
- Undiscovered liens.
- Liens recorded shortly before closing.
- Incorrect heir.
- Claims by spouses.
- Incorrect releases of prior liens/claims.
- Errors in conveyance documents.
- Undisclosed easements.
- Right of access/ingress/egress.
- Boundary line encroachments.
- Any and all adverse claims alleging a superior right to ownership or use.
Do I Need Title Insurance?
- Attorney answer – Yes.
- Title company owner answer – Yes.
- If there is a lender requiring it – Yes.
- Investor answer – depends.
- It is a risk/benefit analysis.
assuming a property and paying a small amount or none to seller, it may
not be beneficial to get title insurance. Why protect $3,000 with a
$2,000 insurance policy.
Line: If you have deceased parties in title, liens/judgments vs.
seller, long period since last insurance policy was in place, or other
factors indicating a higher risk, get title insurance.