At the closing table, your settlement clerk asks you if you would like to purchase title insurance. This is a no-brainer for most people, after all, it is a one-time fee for a policy that will protect you against forged deeds, releases or wills, undisclosed or missing heirs, mistakes in recording legal documents, liens for unpaid taxes, and many other common defects that can come up. What you may not know,however is the often complex process that goes into getting a policy. Here is what happens after you’ve made the smart decision to purchase title insurance.
A title examiner will locate records for name, tax and property information. This preliminary title report will help the title examiner retrieve hard copies of the documents at a faster rate. Some of the usual searches will include county searches against the property, judgment searches against any involved party to the transaction, tax searches, and patriot searches.
Next, the title examiner will do an in-depth examination of all documents on record. This examination will help to evaluate all of the information on record, as well as how or if that information will affect the title of the property.
The underwriter issues the title binder. The title binder is a commitment to issue a title policy which protects both the buyer and the seller during the transitional phase of the sale. This document outlines the amount of coverage the title insurance company will provide, the terms and conditions, and the limitations in the policy. The title binder also outlines any ‘clouds’ that could affect the sale.
A cloud on title is any irregularity or defect in the ownership of the subject property. Some of these irregularities or defects could include things like incorrect surveys, unpaid taxes, foreclosure attempts, judgements and more.
The clouds are now exposed, therefore it is important to address the defects with both the buyer and the seller.
Clouds on title are removed and the decision to move forward with the purchase is made. A title insurance policy is issued. This is a one-time only premium payment. The buyer will pay this fee at the time of closing and the policy will remain in effect for as long as the buyers owns the property.