TITLE 101
Introduction
• A real estate investment is substantial, perhaps
your client’s largest outlay of money, and therefore,
the largest risk.
• Title Insurance covers some of that risk.
• Although Title Insurance is a large part of the
real estate process, it is one of the least understood.
…………..What is Title Insurance ?
TITLE 101 : Title Insurance
• Title insurance is “insurance” that covers defects in the
title from prior to when your client purchased their
property. It protects the Buyer from unforseen defects
to the title of their property, things that could affect
their rights of ownership.
• The title “process” provides information about the
property and involves the proper distributions, payoffs,
and paperwork involved in the transfer of the property.
…………Who are the Players?
TITLE 101 : The Players
Buyer
• The BUYER is typically responsible to pay for Title
Insurance and has the right, according to law, to engage
a title company (agency) of their choice.
• The BUYER is usually required by the Lender to
provide coverage in the amount of the loan…”lender’s
coverage”.
• The BUYER can also choose to purchase “owner’s
coverage” in the amount of the purchase price.
TITLE 101 : The Players
Buyer
• RESPA makes it unlawful for a lender, Broker, attorney
or Seller to require a Buyer to use a particular title
Insurance provider.
• The BUYER will have to choose from a variety of
ENDORSEMENTS to the policy.
• Some Endorsements are required by the lender,
however, others may be advisable.
• See http://www.patitleratingbureau.org/abouttirbop/tirbop-rate-manual for a list of approved
Pennsylvania Endorsements.
TITLE 101 : The Players
Seller
• The SELLER typically warrants “good and marketable
title”, that is title that is free of any liens or adverse
claims that would impair its marketability or cast doubt
that ownership is vested in the owner of record.
• The SELLER is responsible to pay off any liens or
encumbrances.
• Liens are legal claims or security interests in a piece of property,
usually to secure a debt.
• Encumbrances are legal interests, claims or restrictions upon
property in the form of liens, encroachments, deed restrictions,
licenses, easements, or mortgages…..
TITLE 101 : The Players
Seller
• The SELLER must provide the title agency with
paid tax receipts and mortgage and lien payoff
information. This can be accomplished by the
seller(s) themselves or through the realtor, the
title agency or a settlement services company
specializing in conveyancing.
TITLE 101 : The Players
Real Estate Broker/Agent
• The Real Estate Agent typically acts as a facilitator,
acquiring and distributing information to make sure
that the process keeps moving towards settlement.
• Who chooses the Title Company?
• Realtors often charge "conveyancing fees"(to the Seller)
for their assistance in obtaining information and
documentation for closing. Such fees should be
disclosed and agreed to by the Seller in writing.
TITLE 101 : The Players
Lender
• Most lenders require a title insurance policy to
protect the lender against claims that may not
have been discovered by the title search.
• The insurance provides protection for the
lender's security interest (mortgage) in the
property.
• The title insurance required by the lender
protects only the lender.
How do we protect the Buyer....
TITLE 101 : The Players
• Owner's coverage - To protect your client (the
Buyer) against title problems (preferably with as
few exclusions from coverage as possible). It
usually only costs a fraction more, attributed to
the usually higher value of the property versus
the amount of the mortgage.
TITLE 101 : The Players
TITLE AGENCY, SEARCHER, and UNDERWRITER
• TITLE AGENCIES are agents of the title
underwriters for the purpose of issuing title
insurance policies.
• In general, they also accept applications for title
insurance, process the request, prepare title
commitments, conduct the closings and issue the
title insurance policy on behalf of the title
underwriter.
TITLE 101 : The Players
• UNDERWRITER: The Title Insurance Underwriter is
the entity that provides the title insurance according to
the title policy. Pursuant to the policy, they owe two
duties to their insureds: a duty to defend, and a duty to
indemnify. Their obligations to their insureds are
governed by the terms of the title policy. Title claims
are submitted to the underwriter for determination. In
addition, title underwriters provide assistance to their
issuing agents in issuing title insurance policies.
Underwriting attorneys are available for consultation,
and for certain issues, may even have to approve the
agent’s ability to issue a policy of insurance.
• A title agency can have multiple underwriters.
TITLE 101 : The Players
Searcher
• A title searcher is engaged to review the records and to report
that information back to the title agent.
• The title search may be performed by a lawyer, an escrow or title
company, or as is usually the case these days, an individual
specializing in searches.
• Title searches can be very time and labor intensive, or, if real
estate records are computerized, it can be completed fairly
quickly.
•
Liens, records of deaths, divorces, court judgments, and
contests over wills must all be examined, possibly requiring a
search of government offices such as surveyors, county courts,
tax assessors, and recorders of deeds.
TITLE 101 : The Process
• The title underwriter issues a binder,
indicating their intention to insure the title
on a given property and specifying the
amount of insurance, covered parties,
policy terms, limitations and conditions.
TITLE 101 : The Process
• The parties then work to clear any clouds (i.e.,
encroachments) to the title. For example, if
there is an unpaid judgment on the property, the
parties make an effort to get the judgment paid
and clear the title at or before closing.
TITLE 101 : The Process
• The title agency, through their closing officer,
usually (but not always) hosts the closing and
proceeds to pay off liens and judgments,
prorate tax payments and make distribution
based upon the HUD-1 Settlement Sheet that
they prepared. The new mortgage and deed are
executed and recorded at the courthouse in the
county in which the home is located.
TITLE 101 : The Process
• Usually, especially if requested
(RECOMMENDED) , the title officer marks up
the title report to show that liens were satisfied,
endorsements applied and objections are
removed.
• Generally, the premium is paid by the buyer /
borrower at the closing table.
TITLE 101 : The Process
• After the closing the insurance company issues
the actual title policy. The buyer's policy is
generally sent to the Buyer. The lender's policy is
typically sent directly to the lender.