CHAPTER 1THE BASICS OF TITLE INSURANCE “What Does a Title Insurance Company Do?”
Title insurance companies "insure” “title” to “real property”
“Insure” To indemnify by providing monetary reimbursement for losses.
“Title” The rights of ownership in real property.
Real Property Components 1. SURFACE earth
Real Property 2. SUBSURFACE earth
Real Property 3. AIR SPACE earth
Real Property 4. RIGHTS earth
Real Property Includes “Improvements.” Attachments to real estate intended to be PERMANENT. Examples: houses, fences, driveways, trees, and bushes…
Real Property Includes “Fixtures.” Attachments toimprovements that become part of the real estate. Examples: heating, plumbing, and electrical fixtures.
Exceptions to Fixture Rule • Trade fixtures used in a business or trade (usually when leasing). • Emblements, or farm crops, can be sold separately from the land.
Chattels Personal property, i.e., EVERYTHING that is NOT real estate. Examples: • furniture, • vehicles, • stocks, and • bonds.
Chattels Include: • cash, • contracts, and • purchase agreements.
Modular Housing—Real or Personal Property? Is it attached as an improvement and taxed as real property?
RIGHTS, TITLE, AND INTERESTS Certain rights always belong to the government.
Government Rights 1. Police Powers
Government Rights 1. Police Powers 2. Eminent Domain
Government Rights 1. Police Powers 2. Eminent Domain 3. Taxation
Government Rights 1. Police Powers 2. Eminent Domain 3. Taxation 4. Escheat
HIERARCHY OF GOVERNMENT RIGHTS
Federal government has highest priority, then stateis followed by countyand then municipal.
PRIVATE RIGHTS IN LAND These are often discussed in terms of a “bundle of rights.”
Title insurance can insure • almost any estate in real property: • fee title, • a mortgage, • a land contract, • an easement...
CONSTRUCTIVE NOTICE The rights shown by the public record.
ACTUAL NOTICE This occurs when something can be observed, heard, or sensed.
RIGHTS AS CONSEQUENCE OF LAW Unrecorded documents, grantors under legal age, fraud, forgery, duress, insanity, incompetency, unknown heirs, undisclosed marriages, identity theft...
CHAPTER 2 THE BUSINESS OF TITLE INSURANCE
Title Assurance vs. Title Insurance • Title assurance is a broad term including surveys, maps, title opinions, and anything having to do with title. • Title insurance is a specific contractual obligation.
Alternative Products to Title Insurance • Casualty insurance products • Borrowers credit score • “Owner and encumbrance” reports
Lenders • Title policies indemnify lenders against loss. • Use standardized forms and homogenize state laws. • Help home ownership by making sale of mortgages easy.
The Secondary MarketThis ensures a constant source of money for housing. Financiers require title insurance to protect their investment.
Title Insurance Protects Homeowners and Their Investment
Title Insurance and the Real Estate Agent BEWARE! Never tell your buyer they don’t need an owners policy. You may be at risk if there is a problem later!
Title Companies may “insure over” or provide “affirmative coverage” for problems for lenders. Insurance over a title problem is often available to the owner. Ask for it!
Recognize a “Notice of Title Defect.” It is information important to the buyer. !!!
Owner Policy Is Different From Lender Policy Owner’s policies are for the full sale price of the property.
Owner Policy Is Different From Lender Policy Lender’s policies only cover the loan amount, not buyer’s equity.
Owner Policy Is DifferentFrom Lender Policy Owner’s coverage can last forever, as in corporate ownership or a trust.
Owner Policy Is DifferentFrom Lender Policy Mortgage policies decrease in value as the loan is paid down and expire when the loan is paid off.
A title company is either a title insurer (a.k.a. title underwriter) or a title agent. Title Agent Title Underwriter
Title insurers take liability under the policy. Title agents write policies of title insurers.
Closing Liability vs. Title Insurance Liability
Title policies indemnify only title issues
Protect the Lender & Buyer Closing protection lettersfrom the underwriter indemnify closing errors and theft of funds by a title agent.