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|WHAT IS TITLE INSURANCE AND WHY DO I NEED IT?
Title insurance is unlike all other insurance you know. Car Insurance, for example, protects you against an event that MAY occur in the future. Title insurance protects you against an event that MAY have occurred in the past. Your title insurance policy insures that there are no liens or encumbrances on your property from prior owners. If in the event after a closing an issue of ownership, lien or access arises, your title insurance policy will defend you against such issue. In addition, car insurance is paid on a monthly, quarterly, or annual basis, year to year, for the life of your car (a continuing debt); however, title insurance is only paid once, in full, at the closing.
Typically, there are two policies issued during a purchase and sale transaction. One protects the buyer, known as the Owners Title Insurance Policy and the other protects the bank (also known as the lender) known as the Mortgagee Title Insurance Policy. One policy is mailed to the buyers a few weeks after closing and the other is mailed to the bank.
WHAT IS A TITLE SEARCH AND EXAM?
A title search is a detailed report of the public records containing information on the property being sold or refinanced. The Public Records that are searched include the property appraisers records, court records, name searches, tax searches, and other sources. Once all of the searches are complete, the title agent must examine them to determine if there are any outstanding issues. If so, the title agent must cure them prior to closing. Problems could include missing Satisfactions of Mortgage from a prior owner, an incomplete probate case of a prior owner, a lien against the property from a prior owner or even a lien that is against the proposed buyer.
IF THE TITLE HISTORY LOOKS GOOD, WHY DO I NEED A POLICY?
There are many reasons a title policy is required and one of the most common is that the buyers new mortgage company requires an insurance policy to protect their interest since they are lending a portion of the purchase price to the buyers. The new lender needs to be protected against fraud and mistakes, because no one is perfect. In Florida, the examination covers all aspects of ownership during the 30 years prior to closing. Even an expert title examiner can miss a defect that might crop up to create problems for you later.
WHAT TYPES OF TITLE PROBLEMS ARE COVERED BY THE POLICY?
Typically, the policy will cover corrections for problems that did not show up during the title search or were missed by the examiner as well as errors in the public records and in extreme cases, fraud.
WHAT TYPES OF TITLE PROBLEMS ARE NOT COVERED BY THE POLICY?
A title insurance policy does not cover defects that occur after you purchase the property. Remember, the policy you receive protects you against an event that MAY have occurred in the past (from the date of closing, back 30 years). In addition, the policy typically excludes problems with easements, mineral, air, and water rights as well as liens.
AM I REQUIRED TO HAVE TITLE INSURANCE?
If you are buying your home for cash (no mortgage), then no, you are not required to have title insurance; however, if you are obtaining a mortgage for a portion of the purchase price, your lender will require title insurance.
HOW DO I GET TITLE INSURANCE?
Typically, your mortgage broker or real estate agent has a relationship with a title company and once the Sales Contract is signed or, in the case of a refinance, once the application is completed, the mortgage broker or real estate agent sends the file information to the title company. In Palm Beach County, the Seller is responsible for paying the premium for the Owners' Title Policy, which is issued in favor of the Buyer. However, in Broward and Miami-Dade Counties, it’s the Buyer who is responsible for paying the premium and once again, is issued in favor of the Buyer. The premium is paid for in full at closing and is disclosed on the Closing Disclosure. In many instances, the Buyer and/or Seller are not even aware that they have title insurance.
HOW LONG DOES THE COVERAGE LAST / WHEN DO I HAVE TO RENEW THE POLICY?
The coverage under your policy will last for as long as you retain an ownership interest in the property. You do not have to renew the policy. This policy is only paid once when you purchase the property. When you purchase a new property, a title insurance policy will need to be purchased for that property. In addition, if you were to refinance your mortgage, a new Mortgagee Title Insurance policy will need to be purchased. Once again, the title agent who processes your refinance will process the new Mortgagee Title Insurance policy. Remember to keep your Owners Title Insurance Policy in a safe place, as it may save you money when you refinance. Your title agent will need a copy of the entire policy to give you a "reissue credit".
HOW MUCH DOES TITLE INSURANCE COST?
The premium paid for the title insurance is regulated by the Florida Department of Financial Services (formerly known as the Florida Department of Insurance), which is referred to as the “Promulgated Rate”. They devised a formula which is based upon the sales amount (or loan amount in a refinance transaction). Typically, everyone who purchases a home for $600,000.00, for example, will pay the same amount for the one-time title insurance premium ($3,075.00). Below are a few more examples:
|Purchase Price||Premium Cost|
|WHAT DOES THE TITLE COMPANY DO?
In addition to issuing the Title Insurance Policy, the title company, also known as the closing agent, processes the file by performing a title search, tax and lien searches, name searches, and ownership chain, for example, to determine if there are any outstanding liens or issues with the property. Once the searches are complete, all of the data must be examined by the title agent. If there are any issues, the title agent must clear them prior to closing.
Typically, the seller has a mortgage on the property which must be paid off at closing so the title agent must obtain a written payoff from the lender. In addition, the property may be located within a homeowners’ association and if so, the title agent must obtain a written estopple letter which discloses the dues that have been paid to date and how much is currently due and payable.
The title company also prepares several documents for closing including the Settlement Statement (which discloses all of the fees for all parties in the transaction) and the Warranty Deed that the Seller will sign in favor of the Buyer which transfers title of the property from the Seller to the Buyer.
The title company is responsible for recording all of the required documents in the Public Records and is also the escrow agent for the transaction. Acting as the escrow agent means that all of the money for the transaction is deposited with the title company (deposits, the money being borrowed from the lender, and all fees collected from the buyer at the closing) and disbursed at closing.
The title agent coordinates the closing date, time and location of the closing with the lender, the real estate agent(s), mortgage broker, the buyer and the seller. The title agent receives the loan documents from the lender and along with all of the documents the title agent prepares, instructs each party to sign the documents.
|After closing, the title agent must release all of the money being held in escrow to the proper parties. For example, the seller will receive their proceeds, the real estate agent and mortgage broker will receive their commission, the seller’s mortgage must be paid off, they county must be paid for recording the deed and mortgage, and any other fees due to third parties must be paid.
In addition, the loan package that the buyer signed at closing must be sent back to the lender for their files. There are many other functions a title agent performs during and after a closing; however, the ones mentioned here are the most common.
The information provided in this FAQ section of our website is for informational purposes only and is not intended as advice or recommendations. Clean Title and Escrow makes no representations and specifically disclaims all warranties, express or implied, regarding the accuracy, completeness, merchantability for fitness or particular purpose of any material contained in this website