Q. What is title insurance?

A. In its most basic terms, title insurance is an insurance policy that protects you and your legal rights to own, possess, use, control and dispose of land.

Q. What is a title?

A. When you purchase a home, you are really purchasing the title to the property – which is the right to occupy and use the space. That title may be contested based upon past rights and claims asserted by others. These types of claims can infringe upon your purchase of the property or cause you to lose money.

Q. Do I need title insurance?

A. A home is usually the largest single investment any of us will ever make. Title insurance protects against loss of value from hazards and defects that may exist in the title. These hazards include fraud, forged signatures on deeds, unknown property heirs, liens, and documentation errors. If you were uninsured and your right to title is challenged, you could lose significant money defending yourself or you could lose your home. Your mortgage lender will require a loan policy of title insurance to protect their interest in the value of your property and a homeowner should purchase an owner’s policy for the very same reason.

Q. How does title insurance protect me?

A. An owner’s policy of title insurance requires the insurance provider to pay for defending against any lawsuit attacking your title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium generally paid at closing, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.

Q. What is a closing?

A. Closing, which is also known as "settlement" or "escrow," is the event where the title to a property is transferred from seller to buyer. Closing involves the completion of all the necessary paperwork to finalize the agreement between buyer and seller. In addition, all financial issues are settled at closing – closing costs - and once the title is successfully transferred, the necessary documents are prepared, signed, and filed with local authorities.

Q. What are closing costs?

A. Closing costs are all costs required to close the real estate transaction. They can include, but are not limited to, surveying fees, property taxes, title insurance, attorney fees, agent fees, points, loan origination fees, primary mortgage insurance (PMI), and the balance of your down payment. Prior to closing, you should review your HUD-1 Statement to ensure that all the calculations are correct and that you have been given all the credit for deposits and other agreed upon buyer and seller credits. Also recheck all lender, title, and escrow fees to make sure they are accurate.

Q. What occurs before closing?

A.

• Title Insurance is a guarantee to the purchaser or to a financing lender that the title to a particular piece of real estate is free and clear of prior liens and that the title to that property is valid and marketable.
  
  
• Liens (such as mortgages, judgments, taxes, etc.) against the title are a matter of public record. Liens that are not paid off and cleared from the record will be extended to the new owner (purchaser). Therefore, they must be accounted for.
  
  
• The first step for the title agent is to search courthouse records. This search will uncover any liens or other items affecting the title.
  
  
• The search is examined and then issued in a form called a commitment, or title report. The commitment shows, not only liens, but also pertinent issues such as right-of-way, subdivision plans, restrictions and any other recorded items of which a purchaser should be aware. Such items will remain part of the title and the purchaser is subject to them.
  
  
• The next step is settlement preparation, whereby the title agent prepares for the closing. The agent gathers various information including: payoffs, taxes, water and sewer fees, lender costs, and real estate fees relevant to the closing. These charges are placed on a settlement statement (HUD 1) for the closing.
  
  
• The closing itself is the process whereby sellers, buyers, real estate agents, financial lenders, attorneys and the title agent gather to execute and deliver documents which pass title from one party to another. Documents and monies are exchanged and title is passed to the purchaser.
  
  
• The title agent records documents and then issues the final title policy once all recording is correct and appropriate liens are cleared from the record.