Who needs Title Insurance?
Many homebuyers are confused by title insurance. Is it optional? Is it something you may not need, like an extended warranty on an appliance? What exactly does it insure, anyway? The answers are pretty simple. Let’s start with why you need it. Before you go into a closing, it’s critical to know that your title to the property will be free and clear. This means that, after the closing, it will be free of prior indebtedness or other defects or encumbrances. It is then what is called a “marketable title.”
Normally, at the closing the seller gives the buyer a deed, which transfers the title to you and warrants your title against claims of other persons. However, you should not accept a deed without having your attorney, or someone approved by your attorney, conduct a thorough title examination of the property.
A title examination involves researching the public records to disclose the previous owners of record, prior deeds, mortgages, court judgments, probate proceedings and divorces, foreclosures, tax and construction liens, and other matters that could affect title. In other words, the legal history of the property. In some cases, a title examination will uncover title defects that could jeopardize a buyer’s ability to take clear title to the property.
Should research reveal title defects, the seller may be asked to undertake legal proceedings to clear the defects. Of course, you’d want to follow these proceedings closely with your attorney, and make sure that they conform to the requirements of the law.
There are also hidden defects, which may not surface even in the course of a thorough title examination. One of these could put your ownership of the property in question, even after you’ve closed.
Some examples of defects, both obvious and hidden, are the following:
Lost or forged deeds.
A married signer who represents himself or herself as single.
Claims of undisclosed heirs.
Impersonation of another.
Clerical error made at the courthouse when earlier documents were recorded.
Incorrect legal description.
Instruments signed by minors.
Instruments signed by mentally incompetent persons.
Title taken as a result of an improperly probated will.
Confusion of title resulting from similar names.
The point of title insurance is to secure your claim to property and protect you against a hidden defect. If you are forced to defend your title in court, the insurer agrees to pay the costs.
Your lender will insist on title insurance in the amount of the mortgage loan, but a lender’s policy or mortgagee policy does not protect your ownership interest. You need an owner’s policy for that.
The owner’s title insurance policy is an agreement that the insurer will pay all losses involved in any claim covered by the policy terms. The policy provides two types of coverage:
If someone contests your insured title in a legal action, the insurer will defend the title at no expense to you.
If there is a defect in your title which cannot be eliminated, title insurance protects you from financial loss. That is, you will be reimbursed up to the amount of the policy — generally, the full amount of your loss.
You pay a modest, one-time premium for title insurance, and the protection continues in effect forever, even after you sell your home. The policy is issued in an amount equal to the purchase price of the property or its market value.
Is the title company responsible for giving legal advice?
A title agency only prepares documents for closing and issues your title insurance policy. The title agency does not represent your legal interests and cannot give you legal advice. Because ownership is defined strictly by legal rights, it is always best that you seek legal advice from a practicing real estate attorney.
Can a married person purchase property individually?
Yes, in Florida a married person can acquire (purchase) and convey (sell) property individually. However, in the case of homestead property, the spouse must join in the conveyance.
Can I put my minor children in the title?
Yes, you can. However, if you decide to sell, since minors lack the capacity to enter legal agreements, a guardian must be appointed by the court of equity. The guardian could be one or both parents or a third party appointed by the court called guardian ad litem. The court gives to this guardian the authority and responsibility to look after the minor's best interests.
If the note is only in my name, why does my spouse have to sign the mortgage?
If the property is going to be the primary residence of the married couple, then it is necessary for your spouse to sign in acknowledgement that he/she knows that the property is being encumbered and that there is a note that needs to be paid by the borrowers' heirs. In short, someone has to keep on paying the mortgage until it is paid in full.
What should I do prior to the "Closing Day"?
Some of the most common requirements prior to closing are listed below. These items need some time allocated to them and the closing date should not be scheduled until all received and approved. These are usually ordered upon final approval since this expense is payable regardless if there is a closing or not. Commonly these are the buyer's cost:
Termite & other Inspections - if it is not clear, the seller will need time to do the necessary repairs.
Condominium approval and estoppel letter - if purchasing a condominium.
What do I need to bring to the "Closing Day"?
All parties need to bring a valid ID (driver's license or passport) showing your name in the manner in which you are taking title.
If the buyer needs to bring money to the closing, it must be in the form of a cashiers check or a wire transfer payable to the title company. Therefore, keep in mind that you have to go to the bank.
What is a "mail away" closing?
This means that either party or both will not be attending the closing and the documents are sent via Federal Express to them. This requires that the title closer or his/her processor have the party's phone number to coordinate the exact address to ship the documents to and the time frame needed to return the documents. Usually the real estate professional will find out the possibility of this situation as soon as they get the contract and will alert the title closer from the moment they send the title order.
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