Your home more than likely is your largest asset. Title Insurance protects you against future claims that someone may have on your property. There can be a number of people and agencies that very well could file a claim on your property.
The title policy is part of your closing documents package. It should be on top of the stack to be easily accessible if a situation in the future comes up. Some of those who may have an interest in your property could be government agencies, contractors, lenders and even the seller’s relatives and heirs. The title company may have done its best, but as time goes on the property’s history becomes more complex.
The title company, during the loan process, does a search of all records available that concern the property. Some areas that could arise are unpaid tax liens, mortgages with balances still outstanding, unpaid contracts from prior sellers, and judgments. There may be easements and restrictions that have been placed on the property. There could be documents that were signed by a person with an expired power of attorney. In addition to property taxes, there could be unpaid inheritance, income or gift taxes. If any of these circumstances comes up, the title company will have these worked out by closing. If they cannot be cleared it could prevent the sale of the property.
In the case of defects of title not found out by the time of closing of the transaction, the title insurance will cover those claims as defined in the policy. If the seller was incapacitated or there was an outright forgery the insurance will protect the policyholder. At times there can be heirs that are not mentioned. There could be a deed by a single individual not disclosing that he or she is married at the time.
You will receive during the loan process your own copy of the preliminary title report. It will say that the title company is prepared to issue an insurance policy. It will give the amount of coverage and the cost to you for that coverage. In addition to the legal description and plat map it will show any areas that need to be cleared. It will show who is legally vested in the property. At that point if there is anything of concern to you, you need to contact the title officer and go over the issue.
It is up to you to read and understand your title insurance. You will not have a copy yet of the policy until after the loan closes. You will only have hands on the preliminary report. You would want to make sure that you have a grasp of the insurance you will have. This should not be rushed at the last minute when the seller, realtors and you are anxious to close and move on to the next step. Any parts of the insurance that doesn’t make sense or uses terminology that you are not familiar with should be gone over with the title officer. You are allowed at least a day before closing to review all closing documents. That would be a good time to set some time to go over the policy to make sure there are no surprises later on.
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Bill Wehr publishes mortgage articles at www.mortgagejourney.com. Bill has an MBA and is the owner of Great Pacific Northwest Mortgage www.billwehr.com serving Oregon and Washington. For loans please complete a secure on-line application at www.portlandoregonmortgages.com.
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