| What
is Title Insurance?
When you purchase a home on Martha's Vineyard,
instead of purchasing the actual building or land, you are
really purchasing the title to the property - the right to
occupy and use the space. That title may be limited by rights
and claims asserted by others, which may limit your use and
enjoyment of the property and even bring financial loss. Title
insurance protects against these types of title problems for
Martha's Vineyard real estate and brings confidence and certainty
to the parties at a real estate closing that the title of
the subject real property is as represented and expected.
The title insurer offers financial protection and will indemnify
and defend against an attack on covered title hazards as insured,
and will either perfect the title or pay valid claims.
Title search and examination requires the search of numerous
public documents including tax, court judgment, deed, encumbrance,
federal and state records and the evaluation of real property
characteristics such as flood zone and location. Abstractors,
lawyers, title insurance agents and title insurance companies,
sometimes called "underwriters", all work together to accomplish
this process.
You will also purchase several other types of insurance coverage
to protect your home and personal property. Homeowner's insurance
protects against loss from fire, theft, or wind damage. Flood
insurance protects against rising water. These types of insurance
protect your Martha's Vineyard home, focusing on possible
future events. You pay an annual premium charge for this insurance
coverage. On the other hand, title insurance protects against
hidden title hazards and loss from any defects that already
exist in the title and may threaten your financial investment.
In other words, title insurance is the acceptance of risk
for past transactional events rather than future occurrence
of events. Title insurance has a single one-time premium paid
at closing, no termination date and no time limit on the filing
of claims, whereas homeowner's hazard insurance has an annual
premium charge.
There are two basic kinds of title
insurance:
If you are financing your Martha's Vineyard
real estate purchase you will be required to have a Lender’s
Title Insurance policy. That policy only protects
the amount of the Lender’s investment, not
your total investment.
Your Martha's Vineyard Attorney will
strongly advise you to purchase an Owner’s
Title Insurance policy to cover your total
investment.
Here
is a very important disclosure you need to be aware of:
For the purchase of a title insurance policy,
your Attorney also represents the title insurance company
as their Agent. As such he will receive a fee (commission)
from the Title Insurance Company when you purchase a policy.
Normally, the fee structure is 30% of the total cost of
the policy goes to the Title Insurance Company and 70% goes
to the Agent – your Attorney. If you purchase Lender's
Title Insurance only the cost will be approximately $2.50 per thousand.
Lender's Title Insurance
only covers the Lender's investment in the property. If
you purchase Lender’s and Owner’s Title Insurance
policies simultaneously the cost will be approximately $3.50 per thousand
based upon the total purchase price of the property. It is really up to the insurance provider.
- Lender or mortgagee title insurance protects the lender/investor
as security for making mortgage money available to a buyer.
It does not protect the buyer.
- Owner's title insurance protects the buyer, lasts as
long as you, the policyholder - or your heirs - has an
interest in the insured property. This may even be after
you have sold the property.
Documents that don't clearly transfer title are quite often
found in the "chain," or history that is assembled from
the records in a search. Here are some examples of documents
that can cause concern:
- Deeds, Wills and Trusts that contain improper wording
or incorrect names;
- Outstanding mortgages and judgments, or a lien against
the property because the seller has not paid his taxes;
- Easements that allow construction of a road or utility
line or view easements Note: there are many cart paths
and ancient ways on Martha's Vineyard;
- Pending legal action against the property that could
affect a purchaser; or
- Incorrect notary acknowledgements.
Despite all the expertise and dedication that go into a
title search and examination it is possible that hidden
title problems can emerge after closing resulting in unpleasant
and costly surprises despite Some of these hidden problems
include:
- A forged signature on the deed, which would mean no
transfer of ownership to you;
- Instruments executed under an expired or a fabricated
power of attorney;
- Mistakes in the public records; or
- An unknown heir of a previous owner who is claiming
ownership of the property. A title insurance policy is
not an agreement to guarantee the state of title to real
property, but is, rather, an agreement to indemnify the
insured for loss or damage sustained by the insured due
to a defect in title. The crucial concept to remember
is that the policy insures against actual loss sustained
by an insured due to a defect in title.
Owner’s
Title Insurance -- One More Time
I paid for a title search ---
why do I need to buy title insurance also?
A title policy insures against many defects which could
not be discovered in a title search, as well as insuring
against errors made in the title search itself.
Is Owner’s coverage expensive?
No. A one time premium covers you throughout your ownership
and after. When you are already paying for a loan policy,
the additional cost of an Owner’s policy is usually
small.
What’s Covered Under A Standard Owner’s
Policy?
The standard Owner’s policy provides the basic coverage
for a homeowner:
- It insures that you are the owner of the property.
- It insures against losses from any liens or encumbrances
on the property except those listed in the policy.
- It insures against your title being rejected by a subsequent
buyer because it is unmarketable due to a title defect
or lien.
- It insures you have a legal right of access to the
property.
The title policy not only protects you against losses due
to title claims covered by the policy, it also pays for
the attorney’s fees and costs in defending the title.
You are covered under the policy for as long as you own
the property, and also for liability after you sell the
property if you provide title covenants in your deed to
the new buyer.
20 Important Reasons Why You Should
Have Owner’s Title Insurance.
These are just some of the hidden title risks that would
not be disclosed by even the most meticulous title search,
but are covered by an Owner’s policy of title insurance:
- Forgery
- Fraud in the execution of documents
- Undue influence on a grantor of a deed
- False impersonation by someone purporting to be the
owner of the property
- Incorrect representation of marital status
- Undisclosed or missing heirs
- Wills not properly probated.
- Misinterpretation of wills and trusts
- Mental incompetence of a grantor of a deed
- Transfer of title by a minor
- Heirs born after the execution of a will
- Incorrect legal descriptions
- Non-delivery of deeds
- Unsatisfied claims not shown on the record
- Deeds executed under expired or false powers of attorney
- Confusion due to similar or identical names
- Dower or courtesy rights of spouses of former owners
- Incorrect indexing of the land records
- Clerical errors in recording legal documents
- Delivery of deeds after the death of the grantor
Courtesy of Fidelity National Title
Insurance Company. |
