TITLE INSURANCE IN REAL ESTATE PROJECTS

1) INTRODUCTION

2) TYPES OF TITLE INSURANCE

3) TITLE SEARCH PROCESS

4) COVERAGE OFFERED UNDER A TITLE INSURANCE

5) HOW DOES HAVING TITLE INSURANCE PROTECT THE OWNER FROM

6) DEFECTS IN A TITLE INSURANCE

7) IS THE TITLE INSURANCE WORTH IT

8) CONCLUSION

INTRODUCTION:

Title insurance is basically an indemnity insurance where a property holder will be protected
from financial downfall by the property owners. Here, title basically means property which a
person can own legally. A title over a property is a set of legal rights which includes the
owners with the right to use, own, lease, and rent or use it in real estates. But rights within the
title can become challenging due to errors, oversights and neglect. The challenges can be
dealt with if the property has a title insurance, it will provide financial security when the
property is under any dispute. A title insurance will offer peace of mind to the owner and the
ability to tackle any issue that could present themselves in the future.

There may be title defects which will be unknown to the owners, which in case having a title
insurance will help them get over the loses occurred. A title insurance makes sure that you
can defend yourself from any unforeseen charges that might occur after buying a property. It

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helps the parties in real estate transactions determine their rights and interests and to assure
that the transfer of property is prompt, secure and legal. Title insurance was basically created
to protect the interests of all parties in a real estate transaction. The title insurance is a
valuable protection for home purchasers since one can really have no way of detecting the
problems before it arises. Also, acquiring a title insurance will assure us that if there is any
unpaid taxes from previous owners, it can protect the owners of the property. The cost of the
title insurance is onetime fee or as long as you are the owner of a certain property for which
the title insurance exists.

The purpose of title insurance is to guard patrons and lenders from risks of claims against
their rights. Imagine that you simply purchased a home and received the title from the
previous owner. One month when getting, you receive a notice hard to demanding payment
for an expensive bill from the previous year. If the bill isn't paid, your home is going to
be auctioned off to satisfy the debt. Though you were unaware of the bill, but now you are
the new owner, you're accountable to pay it. The unpaid bill is associate encumbrance.
Having a title insurance reduces the risks that are involved in the real estate business.

An encumbrance is something that hinders rights inside the title. There are voluntary and

involuntary encumbrances. Involuntary encumbrances normally arise from lawsuits leading
to judgments and liens, like a mechanics lien, that is once a contractor sues a possessor for
payment. They may even be caused by clerical errors or fallacious transfers of title. An
associate example of a voluntary encumbrance may be a mortgage. For example, you confirm
to permit an investor to put a lien against your property as collateral till you repay the loan.

Title in real estate refers to legal possession to the property. All titles don't seem to be ‘clean’,
but once you apply for title insurance as a vender or as an investor, the title underwriter first
verifies whether or not the title is clean or not. The title insurance company ensures there are
not any covert heirs to the property or land, no unfinished legal actions, no unpaid taxes and
no fraud associated with the title of the property. After verification, title monetary institution
contracts with an underwriting firm to issue a title contract that may get your financial
losses just in case anyone challenges your title and also the policy compensates you for your
equity if you lose.

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A buyer in the real estate transaction, must seek a title insurance from his seller so it is
transparent to the buyer that the property has no liens or encumbrances in its name that could
possibly limit the rights of an ownership.

TYPES OF TITLE INSURANCE POLICIES:

When a title insurance is issues, simultaneously two polies will be issued together. That is the
owner’s title insurance and lenders title insurance.

1) Owners title insurance :

This insurance provides protection to the new buyers of a property. The
owner’s title insurance brings equity to the buyer in the property. The
insurance is a coverage for the owner. This is bought to retaliate any financial
losses that may arise in the name of the property.
This insurance can protect the owner from unforeseen claims or the previous
owner’s debts which are related to your property, one can save themselves
from these liabilities and make sure that their money is not spent abruptly
because of previous owner’s failures.
The insurance is bought by the buyers in order to secure their investments and
enjoy the ownership that comes with the investment in a property, which can
be only done through buying an owner’s title insurance.
It will also help when someone tries to sue the owner claiming that the
property is their own before the owner of the property purchased it. Also, the
liability limit of this policy is quintessential to the amount of money paid for
the property only.

2) Lenders title insurance:

Sometimes the lenders title insurance is also known as loan policy. This
insurance will protect the lender of a property against the issues with the title
of the property only. Customarily, the borrower of the property will buy the
lender insurance which is for the sole benefit of the property in order to give
protection to the mortgage that may be taken for the sake of property.

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 This policy will also protect the institutions lending mortgages to the owner
until the money to these institutions are paid off.
The lenders title policy usually only covers the claims that are made under the
lenders loan, but to protect the equity of the property, one must absolutely
have the owner’s title insurance.

TITLE SEARCH PROCESS:

When a buyer is looking forward to purchase a real estate property, they will look into all
aspects of buying it legally and doing it the right way. A title search is a complex process but
doing it will be very beneficial for the owners and it will help in the long run. This process
will take time to process but the outcome is absolutely magnificent in the long run. They will
also hire a company to perform a title search for the property in order to receive a title
insurance for the property, this process will be very valuable down the road if the buyer
purchases that property and tackle any unforeseen situations that could come through. There
are various business outsourcing services which conduct title search for the real estate agents
and also buyers of the properties.

The process consists of:

 Public record search: a thorough examination of the public records or the government
records of the property will be made in order to check the history of the property.
There could be number of cases filed for the property, where in the previous owners
never took a heed for the same. The companies will have a systematic and analytical
method to find the history of the property in the public records in order to do the
process in an efficient manner and it also ensures accuracy of the property for the
owner to buy safely with all the previous details.

 Property encroachment: an inspection of the property lines will be done by the title
search company where they will measure the property lengths as mentioned in the
property deed in order to make sure that no one is encroaching or the property itself is
encroaching someone else’s land. As encroachment will lead to serious breaking of
laws, this is an important step that has to be performed by the title searchers, they
basically have to verify the information of the property provided in the property deed.

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 Checking for clouds in the title deed: Clouds are basically defects in the property and
every property must be checked if there is any cloud in the property documents, and
to check if there is any gap in the transfer of the title of the property and also the
company must make sure that the property has no legal hassles in order to have a
smooth transaction and issue-free in the future after the property is bought. The
presence of clouds in the title can simply affect the right to ownership of the property
and won’t be able to enjoy the property amidst the issues.

 Checking the chain of titles: This is basically to search for the history of transfers of
the properties which might go up to 70-80 years of history. Doing this will reveal all
the details of the previous owners. If there is any discrepancies between the previous
owners, it can be an issue in the future for anyone who buys that property, this is done
because legality of the property must be checked in order to buy the property by the
current prospect buyer. Also, if there the check on chain of title is incomplete, it is
considered that there is a cloud in the title insurance.

 Checking for judgments or claims: There might be judgements in record which can be
general liens in opposition to the property or any money that is owed under any
judgements against the property. This may also involve legal issues, judgements
which are not in favour of the property. If any such judgements are discovered, the
seller of the property have to make sure that the clouds mentioned above has to be
eliminated before the property is bought by anyone.

 Tax search: doing a tax search will disclose the present status of the property’s taxes.
Unpaid taxes are one of the clouds in the property deed. The title searchers have to
make sure all the taxes of the property has to be paid off and there are no dues
remaining. Sometimes there will be penalties on the account of the property which are
not paid by the previous owners, this has to be taken care by the seller before selling
the property.

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In addition to all the above stated points, a title search will also give a peace of mind to the
purchaser as having a title insurance will absolutely secure the future of the property and the
owner themselves from every unforeseen situations that can occur.

COVERAGE OFFERED UNDER A TITLE INSURANCE

Securing title insurance policy provides coverage for the following:

 If there’s any existing lawsuits or liens on the properties title which was
unforeseen.
 It helps to know forgery of documents and fraud related to the title.
 Errors in public records and surveys will be counterbalanced by the insurance.
 It will also accelerate real estate investments.
 Encroachment issues by any other party will be covered by the insurance.
 Any defect in or Lien on the Title on origin date of the Policy. This lined Risk
includes, however isn't restricted to, indemnification against Loss from a defect in
or Lien on the Title caused by:
 Forgery, fraud, undue influence, duress, unfitness, incapacity or
impersonation;
 Failure of anyone or Entity to possess licensed a transfer or
conveyance;
 A document moving Title not properly created, executed, witnessed,
sealed, stamped, acknowledged, notarized or delivered;
 A document moving Title dead beneath a falsified, terminated or
otherwise invalid power of attorney;
 A document moving Title not properly filed, recorded, or
indexed within the Public Records; or
 A defective judicial or body continuing.
 Absence of right of access to and from the Land and Building on origin date of
the Policy will be covered.
 In addition, the title insurance holders shouldn’t have to bear the costs, legal fees
and expenses incurred in the defence of any matter indemnified under this Policy,
it will all be handled by the insurer.

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RISKS OF NOT HAVING TITLE INSURANCE:
Having no title insurance will expose transacting parties (owner and lender)
to vital risk within the event a title defect in the property. Contemplate a homebuyer and
they find out that the house of their dreams solely to seek out, once closing, and unpaid
property taxes from the previous owner.

 While not title insurance, the monetary burden of this claim for back taxes

rests alone with the client. They’ll either pay the outstanding property taxes or risk losing the
house to the onerous entity if they don’t possess the title insurance. There will be a negative
impact for the property’s owner.
Under identical state of affairs with title insurance, the coverage protects the client for as long
as they own or have an interest in the property. Similarly, the lender's title insurance covers
banks and different mortgage lenders from unrecorded liens, unrecorded access rights,
and different defects.

 Just in case if a borrower's default, if there’s any square measure any problems with the

property's title, an investor would be coated up to the quantity of the mortgage. Real estate
investors ought to certify that a property doesn't have a nasty title before continuing with any
purchase.

Homes in proceeding, as an example, might have variety of outstanding problems.

Consumers might contemplate getting owner’s title insurance to shield themselves against
unforeseen claims against the title.

DEFECTS IN A TITLE INSURANCE:

A defect in title insurance means to have any potential threat to the property’s owner, if
anyone tries to takes full ownership from the current owner or may claim to sell the property
without the consent of the current owner. This is exactly why a potential buyer must get
themselves a title search of the property before buying it. The use of title search will reduce

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the complications and the potential of the property will increase. A title defect can also be
referred to as a ‘cloud’.

Some of the examples of defects that are found in a title insurance is:

 Missing heirs or incorrect status in the public record will be an issue in the title defect;
 Defect will also include filing errors or inaccurate recording of ownership;

 Public records of unsatisfied judgments against previous owners;

 Unknown liens placed on the property;

 Obscured encumbrances in the property;

 Adverse possession by other people;

 An undiscovered will of previous owners.

 Unrevealed easements and survey disputes in the property;

 Wrong impersonation and forgeries by previous owners of the property;

 Unknown municipal compliance issues;

 Negligence of due diligence by the title searchers;

 Impairing ownership rights while doing the title of rights of properties.

 Forgeries in the record by previous owners.

 Possibilities of unknown easements such as property on illegal lands or on government

properties

 The previous owners could be false impersonators of the property while selling you the
house.

These are some of the defects in the property, where the buyer of the property has got to
play safe before buying the same so they can protect themselves in future.

OTHER RISKS OF NOT BUYING THE TITLE INSURANCE IS:

 End up paying debt that isn’t yours- having the insurance can save you from various
liens such as unpaid bills, taxes, mortgages and so on. The insurance can protect you
from such liens.

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  Owner losing a part of their property due to encroachment: the issues of
encroachment is higher than people usually know. Encroachment is basically
intrusion of another person into your property illegally but if the owner has the title
insurance, they will be saved from the issues of illegal encroachment.
 Losing the ownership of property: this is one the most extreme situations, where
people try to sell your properties, so if the property’s owner has a title insurance they
can be saved from losing the ownership of the property which happens illegally.
 The Risk of Paying Large Amounts of Money to Protect Your Ownership Rights: If
there is owner’s policy, the title insurance company will defend the property’s owner
to defend them if the situation overcomes.

IS THE TITLE INSURANCE WORTH IT?

Yes, title insurance is definitely worth it, as it keeps us safe and not having to worry about
any potential issues such as anyone trying to take over your own property, these kind of
issues can be relatively resolved by acquiring a title insurance.

CONCLUSION:
To conclude we can say that the title insurance is a very valuable asset to the purchaser of the
property even before any problem that could arise in the future, also having a title insurance
can be a huge time saver for the owner of the property. As the insurance policy is
comparatively an inexpensive tool which can help the homeowners to guard their own
properties from unknown dreadful forecasts, this insurance can potentially help them from
complex and costly issues. Without title insurance the owners are a big risk in the commercial
transactions with the lenders in the market, which is further more important for an owner to
possess title insurance.

REFERENCES:
 https://guardiantti.com/uncategorized/3-things-you-risk-by-not-purchasing-title-
insurance/#:~:text=If%20you%20don't%20have,conflicting%20wills%20and
%20missing%20heirs.
 https://guardiantti.com/education/what-is-a-title-defect/

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 https://www.reca.ca/wp-content/uploads/PDF/Title-Insurance.pdf
 https://www.consumerfinance.gov/ask-cfpb/what-is-lenders-title-insurance-en-
163/#:~:text=Lender's%20title%20insurance%20only%20protects,to%20get%20a
%20mortgage%20loan.&text=The%20lender's%20title%20insurance
%20policy,that%20affect%20the%20lender's%20loan.
 https://www.consumerfinance.gov/ask-cfpb/what-is-owners-title-insurance-en-
164/
 https://www.stewart.com/content/stewart/stewartcom/en/insurance/title-
insurance/what-does-title-insurance-protect-you-from-a-lot.html
 https://www.stewart.com/en/insurance/title-insurance/what-is-title-insurance.html
 https://www.proplogix.com/blog/what-are-the-most-common-defects-on-a-title-
and-how-to-avoid-them
 https://www.firstam.com/ownership/what-is-title-insurance/
 https://www.stewart.com/en/insurance/title-insurance/your-guide-to-the-real-
estate-transaction/why-title-insurance.html
 https://www.investopedia.com/terms/t/title_insurance.asp
 https://www.turtlemint.com/health-insurance/articles/title-insurance-in-india/
 https://www.gao.gov/new.items/d07401.pdf
 https://www.firstam.com/ownership/10-common-title-problems/
 https://www.firstam.com/ownership/title-insurance-policy-types/
 https://www.dataentryindiabpo.com/blog/exploring-5-major-steps-involved-title-
search-process#:~:text=The%20very%20first%20step%20in,the%20last
%2060%20%E2%80%93%2070%20years.&text=Title%20Search%20Services
%20are%20usually,last%2060%20to%2070%20years
 https://propertymetrics.com/blog/the-role-of-title-insurance-in-commercial-real-
estate-transactions/

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