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Title Insurance: What you need to know about it 

When you buy a home, you and the seller sign papers, title is transferred into your name, and the home is yours. Or is it? What if an undisclosed heir shows up with proof of ownership? What if a survey proves that part of your home sits on your neighbor's property? what if a contractor put a lien on the property but it was improperly recorded? You could be making mortgage payments on a house you don't legally own... and you might even lose your home.

Question: What is title insurance?

Answer:  Title insurance is protection against past events, unlike homeowner's insurance, which protects against future problems. When a home is sold, a title searcher researches public records, such as deeds, court records, property and name indexes, tax records, and records of divorces, liens, deaths, contests over wills and many others to prove ownership of the property. Title insurance protects from mistakes or threats that might result in financial loss. John Lotardo, Vice President and general counsel of Stewart Title and Trust of Phoenix says that although a title policy is not carte blanche - there may be exclusions to the policy - it eliminates risk from most title claims.

 

Question: What are the most common title defects?

Answer:  Some of the most common defects include forged wills or deeds; delinquent land, estate or federal taxes;  inaccurate survey; unrecorded liens; pre-existing violations of deed restrictions; invalid divorces; undisclosed heirs and secret marriages; birth or adoption of children after date of will; mistakes in recording documents.

 

Question: Who needs title insurance?

Answer: Most mortgage companies require the buyer to pay for lender's title insurance, which protects the lender's interest in the property should a problem arise with the title. However, this does not protect the buyer. In Arizona, most resale home sales use the Arizona Association of Realtors Residential Resale Purchase Contract which requires the seller to pay for the buyer's title insurance (Called Owner's Title Insurance.)

 

Question: What does Owner's title Insurance cover?

Answer: Owner's title insurance protects the owner should a problem arise with the title that was not uncovered during the title search and pays for any legal fees to defend your claim to the title. The coverage depends on the type of policy purchased. The American land Title Association (ALTA) Homeowner's Policy of Title Insurance is the most comprehensive. There may be some 'exceptions' that will be excluded from the coverage. read your policy carefully so you are aware of these. Common exceptions include boundary line disputes, easements or claims of easements not shown in public records, taxes or special assessments left off the public record; unrecorded mechanic's liens; mineral and/or water rights; zoning and environmental protection laws; subdivision and building codes. To cover exceptions, ask your escrow agent about extended coverage or special endorsements.

 

Question:  If I'm purchasing a new home, why do I need title insurance?

Answer:  Though you are the first owner of the home, there may have been several owners of the land the house is built on. A title search should uncover existing liens and a survey should determine the boundaries, but many of the defects found in resale property can exist in new home purchases. Owner's title insurance protects you against these potential problems and pays for legal fees to defend a claim.

 

Question: do I need title insurance for a condominium?

Answer: Just as a new or existing home can have title defects, similar defects can exist in condominiums. A title search will reveal any defects in the title of the unit along with any problems or liens involving the condominium building or the complex itself.

 

You can learn more about title insurance at www.alta.org or on the Arizona Association of Realtor's web site. www.aaronline.com. Search for "title insurance" .

 

This article copied from the Arizona Republic, Saturday, March 1, 2003, written by Diane Cole