Why You Need Title Insurance
Title Insurance, especially Owner’s Title Insurance, is extremely important when purchasing a house or piece of property.
Buying a home is the single largest investment most people will make in their life time and a purchaser must protect their interest in the property they are purchasing.
Here are some answers to the more common questions about title insurance.
Types of Title Insurance
There are two types of title insurance: Lenders Title Insurance, also called a Loan Policy which protects the lender only if a problem should arise regarding the title. The Loan policy is usually based on the dollar amount of the purchaser’s mortgage. The purchaser is usually the one that pays for the title insurance which is offered at a discount rate due to the purchaser having an owner’s title policy on the property.
The second is the Owner’s Title Insurance which is usually issues in the amount of the sales price of the property. It is purchased for a one-time fee at closing and lasts as long as the Owners or his/her heirs have an interest in the property. Only the Owners’ title insurance fully protects the purchaser should a problem arise with the title that was not uncovered during the title search. Owner’s title insurance also pays for any legal fees involved in defending a claim to the title.
Prices, and the way title insurance is issued, vary from state to state. Michigan is a filed rate state.
How Am I Protected?
In order to issue title insurance, the title company must search public land records for matters affecting the title of the property.
In Michigan the search of the “chain” of title goes back 40 years.
When an examiner searches the title of a property they are looking for several different issues such as:
- Does the seller own the property they are selling?
- Does anyone else have an interest in the property?
- Does the legal description match with the County for deed certification and does the property legal description close?
- Are there any tax liens or judgments against the seller?
- Are there any easements or restrictions that can affect the title?
- Any association or bylaws or right of way?
- Any encroachments on neighbor’s property?
- Oil and Gas leases? Mineral rights reserved?
These are all problems that need to be fixed prior to a closing of the property in order for a title company to give free and clear title to the new owner and be able to issue an owners title policy.
Common Title Problems
- Fraud & Forgery
- Conflicting Wills
- Missing Heirs
- Undisclosed but recorded prior mortgage
- Deed challenged as being give under fraud, undue influence or duress.