Title Insurance Protects Your Interests
By Jonathan G. Higie
You have an agreement to purchase your dream home and you are finally ready to close. When you arrive at the closing, the closing costs are reviewed with you and you notice a fee for "Title Insurance." Because title insurance is required by the bank, you do not question what it is or what you get for it. This article will provide some insight into the purpose of title insurance and the benefit it provides to you.
Once the deed is signed and delivered to you by the Seller you have "title" to the property. You assume that you are the owner of the property. You assume your "title" is clear. But how do you really know? You know because the title insurance company is guaranteeing that it is. If some other person or entity ever challenges it, the company will defend your ownership and/or cure any title defects.
The title insurance company is willing to make this promise to you because it has researched the title to the property (generally for the last 60 years or so) and knows who the previous owners were and is aware of any liens placed against the property. Prior to issuing the title policy, an experienced title searcher reviews all public documents related to your property. The Recorder of Deeds Office, the Prothonotary's Office, and Register of Wills Office and the various tax offices are searched. If the title company is satisfied that all of the public documents are in order, and there are no liens on the property, it will issue the title policy. Existing liens against the property, such as mortgages of the prior owners, are paid off at the closing.
It is very common for clients to say to me, "I don't need a title search because the property has been in our family for 50 years and there are no problems with it". But what if your grandfather never paid off his mortgage? Or what if your uncle owned four parcels of land but deeded the wrong one to your mother? What if the property was in your father's name alone and he is now dead? Inadvertent or innocent errors can "cloud" up the title to real estate.
Other problems include: execution of a deed by someone with a legal disability; mistakes in public records or in recording; defective notarization; bad descriptions; erroneous location of a right of way; erroneous interpretations of wills; undisclosed heirs; irregularity in tax sales; and liens for unpaid estate, inheritance, income or gift taxes and/or special assessments. A title examination is the only way to discover these problems. When discovered prior to the closing and issuance of the title policy, the errors can often be corrected by the Seller prior to the closing.
A title insurance policy can also offer you protection for things discovered after the closing including: forged deeds, mortgages or satisfactions or releases of mortgages; instruments executed under expired or fabricated powers of attorney; or a deed executed by someone who "forgot" to get divorced before he remarried, or who "forgot" he got divorced and has inherited the property as the surviving spouse, or who "forgot" that he already sold the property to another purchaser who is now in possession of the property. Or perhaps you have acquired good title to property which lacks a legal right of way to access it.
Many of these issues can arise despite the fact that a thorough title search was performed. In many of these instances, a title insurance company will cure the title defect if they have issued a title insurance policy. As is the case with other types of insurance, there are exceptions to coverage in title insurance policies and there are also additional types of coverage that can be purchased. The premium for title insurance is paid only one time (at the closing). In Pennsylvania, the rates are established by the Pennsylvania Insurance Commission. Accordingly, rates for title insurance do not vary significantly between lenders or settlement companies.
Obtaining title insurance is an integral part of any real estate purchase. Peacock Keller is a licensed title insurance agent and can assist you in procuring title protection and peace of mind.
Peacock Keller & Ecker, LLP • 70 East Beau Street • Washington, PA 15301 • 724-222-4520