Table of Contents
- What is Title Insurance?
- Why do I need Title Insurance?
- How do Title Insurance companies charge for premiums?
- Who chooses the company I get my policy from?
- If prices are regulated, why do I care who I get my policy from?
- If the title company does a thorough records search and examination, why do I need the policy?
- How will I understand the documents I am signing at closing?
- Can I wire my closing funds to Patriot Land Transfer?
- Can you wire my proceeds from closing to me?
- What do I need to bring to closing?
- If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?
- Do I have to purchase Title Insurance?
- What types of claims, or risks, are generally covered by title insurance?
- What are the chances of ever using my Title Policy?
- How else is the Title Company involved in my transaction?
- What is the origin of title insurance?
What is Title Insurance?
Title insurance is a form of indemnity insurance which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Typically the real property interests insured are fee simple ownership or a mortgage.
Why do I need Title Insurance?
When you purchase your home, how can you be sure that there are no issues with the home's title and that the seller really owns the property? How can you be sure that there are no other parties with interests in the property? What if there are outstanding mortgages or liens against the property that the seller decided they didn’t need to disclose or simply wasn’t aware of? Problems with the title such as these can limit your use and enjoyment of the property, as well as result financial loss. A title insurance company performs a search on the premises and an in-depth examination. Afterward, processers disclose any found issues and attempt to help clear them up if possible. So a title insurance agency helps to ensure that all information is transparent to help you make the best decision and then your policy protects you from the possible financial loss that can occur from the multitude of other unforeseen issues. When considering that a home is usually an individual’s most expensive and important investment in their lifetime, it is easy to see why it is important to protect yourself and your investment.
How do Title Insurance companies charge for premiums?
Title insurance premiums are regulated in most states and based upon the total purchase price of a property or loan amount for a refinance. In many states, even the basic fees are regulated and have very specific guidelines that need to be followed for charging for items such as overnight fees, settlement fees, banking costs, etc. It is important to have a firm understanding of everything that a title insurance company is charging, including ancillary fees, and not just for the premium.
Who chooses the company I get my policy from?
It is important to know that the party who is purchasing the policy has the right to choose the company they get the policy from. In New Jersey and Pennsylvania, this means that the “Buyer” during a purchase and the “Debtor” or “homeowner” during a refinance has the right to choose which title insurance company they utilize for their transaction.
If prices are regulated, why do I care who I get my policy from?
There are many considerations that you should take into account when choosing the title insurance company you go with. While premiums and fees are regulated, sometimes ancillary fees can add up within the price of your transaction, so it is important to review your quote and ask questions. Moreover, cost should not your ultimate deciding factor. The most important quality that you want in your title insurance company is solvency of their underwriters. While it is quite rare for banks and insurance companies to go out of business, it does happen. Since your owner’s policy does not expire for the life of which you own the premises, it is very important to know that the insurance company that your policy comes from will be around just as long as you own your home and have the ability to pay any claims you may have in the future. The largest underwriters in the United States (by market share) are as follows:
1) Fidelity National
2) First American
3) Old Republic
5) Other miscellaneous regional companies
Patriot Land Transfer works with two of the top three largest underwriters in the country to ensure the best service and coverage for the consumer. Patriot underwrites all policies with Old Republic and Chicago (a subsidiary of Fidelity National).
The final factors that are important when choosing a title insurance company are customer service and experience. It is of the utmost importance that the agencies processors, examiners, other staff, and search vendors are all highly experienced in the industry and have seen as many case studies to ensure the best quality transaction and coverage is put forward. Patriot Land Transfer has over 200 years of combined experience amongst its key staff and has dealt with a multitude of different circumstances across thousands of transactions. Patriot Land Transfer also makes customer service and transparency a priority. The consumer is the client and Patriot wants to deliver the most personalized and smooth transaction for their client and all parties involved.
If the title company does a thorough records search and examination, why do I need the policy?
There’s always the possibility that the title searcher missed something. But there’s also the possibility that there were defects or discrepancies the title search could not have found such as forged signatures or misfiled liens or judgments. Your policy will protect your from unforeseen issues and circumstances that can become apparent at a later date.
How will I understand the documents I am signing at closing?
Your closing agent will provide a brief description of each document you are required to sign at closing. They are not attorneys and are not authorized to practice law or offer legal advice. You may want to have a lawyer present at your closing. Secondly, Patriot Land Transfer cannot offer tax advice. You may also want to ask your lender if they can provide copies of the loan documents prior to the closing for your review.
Can I wire my closing funds to Patriot Land Transfer?
Yes! Funds for closing may be wired to Patriot Land Transfer. Contact our office for wiring instructions.
Can you wire my proceeds from closing to me?
Yes! Proceeds checks are normally printed and given at closing; however, if you prefer your funds to be wired, you may opt for that. Simply fill in the proceeds letter asking for your funds to be wired and provide a voided copy of a blank check. (Patriot Land Transfer usually requests to not wire or overnight proceeds funds that are smaller, such as under $250).
What do I need to bring to closing?
You will need to bring…
• Funds for closing in the form of a cashiers or certified check payable to Patriot Land Transfer
• Photo Identification: valid state issued driver’s license, passport, or state issued identification card
• Your original Homeowners Insurance policy and paid receipt
• Any items required by your lender as a condition of closing that has not already been satisfied.
If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?
The lender’s policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing, and the claim threatened the lender’s ability to foreclose and recover its principal interest. Also, the coverage for the loan policy decreases as the loan amount decreases over the years. And, in the event of a claim, there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional cost of an owner’s policy is a bargain.
Do I have to purchase Title Insurance?
If you want a mortgage loan, all mortgage lenders require title insurance to protect them in an amount equal to the loan. The title insurance lasts until the loan is repaid. As with mortgage insurance, it protects the lender but in most cases the buyer pays the premium, which is a single payment made up front. While an owner’s policy is not mandatory, it is highly recommended to purchase it simultaneously with your loan policy for minimal additional costs.
What types of claims, or risks, are generally covered by title insurance?
• Forgery and impersonation;
• Lack of competency, capacity, or legal authority of a party;
• Deed not joined by a necessary party (co-owner, heir, spouse, corporate officer, or business partner);
• Undisclosed (but recorded) prior mortgage or lien;
• Undisclosed (but recorded) easement or use restriction;
• Erroneous or inadequate legal descriptions;
• Deed not properly recorded; and
• Lack of a right of access.
What are the chances of ever using my Title Policy?
In essence, by acquiring your policy, you derive the important knowledge that recorded matters have been searched and examined so that title insurance covering your property can be issued. Because title insurance companies are risk eliminators, the probability of exercising your right to make a claim is low.
How else is the Title Company involved in my transaction?
Most title insurance companies also provide closing and settlement services in connection with real estate transactions. After a contract has been signed and accepted by all parties, the listing agent will forward a signed copy of the contract along with any earnest money to the title company who will be performing the insurance and closing work. The title company will then search the property records, identifying any mortgages or liens that need to be paid off. The title company will issue a commitment for title insurance, detailing the premiums owed for insurance, requirements to be fulfilled prior to issuance of a policy, and any exceptions to coverage that may have been identified (covenants, mineral rights, easements, etc.)
The title company receives instructions from the buyers’ lender, laying out additional fees that need to be paid (appraisals, credit reports, flood certifications, and accounts for taxes and insurance), and the title company will then work up a settlement statement for approval. The settlement statement details all sides of the transaction, and shows any and all fees and premiums that are to be paid.
At the closing table, sellers sign the deed to the property over to the buyers, everyone signs disclosures required by the title company, and the buyers will sign their loan documents. Once all monies have been accounted for, the sale is complete and keys are given to the buyers. After closing, the title company uses the money that was brought to closing (either by the buyer, seller, or money that was wired to the company by the lender), and pays off any outstanding liens, gives the seller any money that is due to them, and pays the underwriter the premium for insuring the property.
The title company then records the deed to the property at the county, as well as anything that needs to be recorded to show the lenders’ interest in the property.
Upon recording, title policies are issued, signed and mailed to the lender.
The title policy is an important document – evidencing the contract of insurance between the owner of the property and the title insurer – and should be kept in a safe location in case any issues arise later.
What is the origin of title insurance?
Prior to the invention of title insurance, buyers in real estate transactions bore sole responsibility for ensuring the validity of the land title held by the seller. If the title were later deemed invalid or found to be fraudulent, the buyer lost his investment.
In 1868, the case of Watson v. Muirhead was heard by the Pennsylvania Supreme Court. Plaintiff Watson had lost his investment in a real estate transaction as the result of a prior lien on the property. Defendant Muirhead, the conveyancer, had discovered the lien prior to the sale but told Watson the title was clear after his lawyer had (erroneously) determined that the lien was not valid.
The courts ruled that Muirhead (and others in similar situations) was not liable for mistakes based on professional opinions. As a result, in 1874, the Pennsylvania legislature passed an act allowing for the incorporation of title insurance companies.
Joshua Morris, a conveyancer in Philadelphia, and several colleagues met on 28 March 1876 to incorporate the first title insurance company. The new firm, Real Estate Title Insurance Company of Philadelphia, would "insure the purchasers of real estate and mortgages against losses from defective titles, liens and encumbrances," and that "through these facilities, transfer of real estate and real estate securities can be made more speedily and with greater security than heretofore."
Morris' aunt purchased the first policy, valued at $1,500, to cover a home on North 43rd Street in Philadelphia.  (NEED SOURCE)