Why Do I Need A Title Insurance Company?
Generally, a title insurance policy protects against loss due to certain defects in the title to your property. A lender’s title insurance policy only protects the interests of the lender, and does not provide any protection to you as the owner of the property being purchased. An owner’s title insurance policy may be purchased to protect against potential risks that may arise as a result of certain title defects. Such potential risks may include, but are not limited to:
– Fraud/False Impersonation
– Forgery of documents including Deeds or Wills
– Liens for unpaid debts, including court judgments or unpaid state or federal taxes
– Mistakes in recording title documents
– Missing or undisclosed heirs/claimants
– Invalid Deeds (i.e. Deed executed by minors or persons of unsound mind)
When a title search is ordered for a real estate transaction, the title insurance agency will perform a search of the land records for such things as the history of conveyances and liens on the property, plus any easements, restrictions or covenants which may affect its use. Also, the title company will search public records for information on the seller(s) and buyer(s)/borrower(s) involved in the transaction for things such as tax liens, judgments and other court actions which can affect title to the property.
Once the research on a transaction is complete, the title insurance agent will issue a commitment for title insurance. This commitment contains three parts. Schedule “A” of the commitment tells the effective date and time of the commitment and the proposed insureds and insurance amounts of the policies to be issued. It also gives information on the current ownership of the property and its legal description. Schedule “B-1” of the commitment is a list of requirements to be met before or at closing for a title insurance policy to be issued. Typically this will include releases of all existing liens found on the property, the conveyance of the property from the seller to the buyer and the execution of any new liens by the buyer. This schedule may also include any other special requirements specific to your transaction. Schedule “B-2” of the commitment will list all exceptions to coverage which may appear on the final title policy. This list would typically include such things as future real estate taxes, easements, restrictions and covenants.
The title insurance agent will issue, along with their commitment for title insurance, an invoice outlining their charges for the transaction. These charges may include:
Title Search: This is a complete history and check of the chain of title to the subject property as described above.
Title Insurance Premium: This is the insurance premium you are paying for the policy(ies) to be issued. The amount charged is based on the amount insured (loan amount and/or purchase price) and is based on rates filed with the Missouri Department of Insurance.
Title Service Fee: The amount charged is based upon the dollar amount of the transaction. This fee covers search examination and file processing costs.
Purchase Closing Fee: This fee applies to purchase transactions only. Typically, this fee is split between the buyer and seller at closing.
Closing Protection Letter (CPL): The CPL may indemnify lenders, owners and sellers against loss of settlement funds due to the acts or omissions of company personnel, including theft of settlement funds and failure to comply with written closing instructions. CPL costs are based on rates filed with the Missouri Department of Insurance.
In addition to title research, you can expect the title insurance or closing agent to do several specific things for you. Included in the cost of the closing and title fees will be the following: ordering of the preliminary title report; securing payoff demands/and or beneficiary statements from existing lenders and requesting full releases of any deed of trust or mortgages to be paid off al closing; obtaining instructions and loan documents from the new lender; obtaining documents to clear any outstanding liens against the property, issuing receipts for deposits of documents and holding funds in a separate account; prorating taxes interest, rents, etc.; preparing buyer’s and seller’s escrow instructions and seeing that all documents are properly executed; coordinating all these things so the transaction can close on time; recording the necessary documents, such as conveyance deeds, deeds of trust, powers of attorney, and releases when all the conditions of the transaction have been met; and disbursing all funds to the proper parties, delivering documents and preparing the final closing statements.
Following your closing, the title insurance agent will follow-up on recorded documents required in the commitment and they will issue the final title insurance policies. Typically the issuance of final title insurance policies occurs within 45 days of closing.