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What
Is Title Insurance?
For the
property owner, it is a guarantee that they own the property
free and clear of any liens other
than the ones they agreed to when they purchased the property.
The most important aspect is that the
party who sold the property did, in fact, own all the interest
and no one else can claim that they have an
interest. This protection, or promise, lasts as long as the
insured party owns the property.
For the
lender, it is a guarantee that it has a valid and enforceable
lien (loan or deed of trust) secured
by the property, that no one else other than those listed
on the policy has a prior claim (or loan, etc.) and that the
party to who they are making the loan does own the property
being used as security for the
loan. This protection remains in effect as long as the loan
remains unpaid.
The existence
of a lenders title policy encourages lenders such as banks,
savings and loan association, commercial banks, life insurance
companies, etc., to loan money. Because they are lending other
people’s money (savings or policy holder’s funds)
they must be concerned with safety should the borrower not
make their payments. The title company insures that the title
to the property is marketable in the event of foreclosure
and the guarantee is backed by the integrity and solvency
of the title company. Of course, this benefits everyone—from
the single-family homeowner to the owner of a high rise building.
Before issuing a policy of title insurance, the title company
must review the numerous public records concerning the property
being sold or financed. This information is available to anyone
who has the time and patience to spend at the county recorder’s
office going through the hundreds of thousands of recorded
documents. This review, or title search, will determine who
owns the property, if any property taxes need to be paid,
how many outstanding loans were taken out on the property,
what utility companies, if any, have a right to use a portion
of the property for phone, gas, electrical or water lines,
(known as easements), what a homeowner is and is not allowed
to do with their property by reason of certain Conditions,
Covenants and Restrictions (CC & R’s) and if anyone
else has a possible interest in the property.
The purpose
of this title search is to clear up all problems before the
new owner takes title or the
lender loans money. This is known as RISK ELIMINATION versus
RISK ASSUMPTION (taking on liability based on what happens
in the future). Examples of the latter are car, health and
life insurance. Each of these types of insurance charge on-going
fees for coverage and base their coverage on what may happen
in the future. Title insurance, on the other hand, takes on
coverage based on what has already happened and charges a
one-time fee at the time the property is purchased or refinanced.
While some may feel this is just another “garbage fee”,
it is pretty reasonable considering one’s policy could
last a lifetime.
Once a
policy of title insurance is issued, the title company will
pay for the costs and legal expenses associated with any valid
claim presented to the company. Without the policy, the homeowner
or lender
or builder - whoever would have benefited by having a policy
of title insurance - would have to cover all costs on their
own.
Title
insurance isn’t just for a homeowner. Subdividers need
it when they are planning a new tract of homes or a commercial
strip center. Attorneys use it for clients who are investing
in shopping centers, hotels, high rise office structures,
hospitals and countless other projects. Builders need it in
order to obtain construction loans from their lender. Everyone
wants to have peace of mind when making a large
investment of their hard earned money. Title insurance companies
help protect this important investment,
no matter how large or small, with its own reputation and
financial strength.“Isn’t sleepingwell at night,
knowing your home is yours, reason enough for title insurance?”
See also
Ins
and Outs of Title Insurance and 20
Reasons for Title Insurance
South
Bay Brokers
1640 So. Pacific Coast Hwy.
Redondo Beach, CA 90277
(310) 375-0583
(310) 375-9616 Fax
2501 No. Sepulveda Blvd.
2nd Floor
Manhattan Beach, CA 90266
(310) 546-7611
(310) 545-0515 Fax
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