1. Title Insurance Policies
2. What Is a Title?
3. Why Title Insurance is Needed

The purpose of a title search is to make sure the property's title has no defects. It's one of those behind-the-scenes tasks that must take place before closing on a piece of real estate. Usually, it's intended to pave the way for title insurance, but there are other reasons for doing a title search.

Title Insurance Policies

It's important to make sure that the title to a piece of real estate has no defects before a title insurance policy is issued. This is known as establishing clear title and involves a search of courthouse records to make sure no problems exist that could potentially affect legal ownership of the property.

Three types of policies are issued:

  • Owner's title: This ensures that there is a clear title and protects the buyer from incorrect signatures and forgery, fraud, defects in the property records, encumbrances and liens, and restrictive covenants that might affect the usage of the property.
  • Extended owner's title: This protects against any building permit violations that previous owners may have had, errors in subdivision maps, living trusts, structural damage resulting from mining, and forgery or encroachment that takes place after the title is issued.
  • Lender's title: This protects against unrecorded liens on the property, unrecorded easements and rights of access, and any other potential unrecorded issues.

Along with these issues, a title researcher ensures there are no issues that may cause ownership to be questioned, such as:

  • Flaws in property deeds
  • Unpaid mortgages or other loans
  • Liens resulting from unpaid owner's association fees
  • Judgments against the property
  • Unpaid taxes

The extent of the search depends on the reason for needing the title search. The researcher may only cover the past few years, but in some cases, the search may even go back to the original land patent granted by the government.

Until the title search is completed, a title insurance commitment can be issued; this promises that a policy will be issued if the requirements are met. These commitments must contain the property's legal description, current owner's name, information on property tax payments, and any exceptions that will exist on the policy.

Along with the title insurance commitment, an attorney may issue a formal written opinion that declares the status of the title. If defects are discovered during the title search, the current property owner must seek assistance from the issuing attorney to create a clear title. There are several reasons for requesting this opinion. For example:

  • Family members may wish to determine the status of a property owned by an estate.
  • Creditors may need to know the title status before placing a lien on the property.
  • Real estate developers may need title opinions before purchasing land.
  • Parties to a lawsuit may need to determine the property's ownership status.

Title searches are necessary not only for issuing title insurance but also for closing on the property — completing the purchasing process. Any outstanding issues must be satisfied and removed before closing can take place.

What Is a Title?

Real estate buyers are given “title” to the piece of land they are purchasing; this is a document declaring their right to own and use the property. Different ways to title a property include tenants in common, joint tenants, right of survivorship, or a life estate. Also, since a piece of land can be used for many purposes, the owner of the property itself may not hold title to the mineral or utility rights.

Why Title Insurance is Needed

Since there are so many things that can go wrong with property ownership — liens for unpaid taxes or loans, easements claimed by the city, errors in recording, for example — title insurance protects the property owner from a later discovery of these issues. Whereas the typical insurance policy, such as homeowner's or automobile insurance, covers events that take place after the policy is issued, title insurance does the opposite. It covers events that have taken place before the policy is issued.

All insurance companies need to minimize their risks when issuing policies, and a title search is the title insurance company's way of doing so. Title insurance is a relatively inexpensive, one-time fee.

Title searches also benefit the buyer of the property so they may be confident that there are no issues preventing them from being the rightful owner. It ensures that nobody else can possibly claim even partial ownership.

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