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What is
Title Insurance?
Title Insurance
eliminates risks and prevents losses caused by defects in title
arising out of events that have happened in the past. Anytime a
document is recorded, or simply executed, title to the described
property could be encumbered and a potential title defect
created. Because of the effective risk identification and
elimination services of title insurers, the parties to real
estate transactions have the best possible chance for avoiding
title claim and loss.
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Who Needs
Title Insurance? |
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THE
PURCHASER
Whether the transaction involves a multi-million dollar office
building or a single family home, the purchaser faces possible
serious financial loss because the seller may not own all the
interests. An expert title examination before completion of
purchase identifies the nature of title the seller can legally
transfer. Owner’s title insurance protects against various
hazards, including those even the most thorough search of the
public records will not disclose.
THE SELLER
By identifying title problems so they can be cleared up whenever
possible, and then insuring against title risks including those
a search may not disclose, title insurance encourages prompt
completion of a transaction. This allows the seller to receive
the purchase money within a relatively short time.
THE LENDER
Mortgage loans are facilitated through lender’s title coverage,
which provides a high
degree of safety against loss of capital from title hazards. By
identifying risks so they can be eliminated whenever possible,
the title industry is a major element in encouraging lenders to
invest in mortgages – rather than in other assets with lower
risk than in a mortgage without title policy protection.
THE BROKER
By calling in the title company early, the broker becomes
informed of the alternatives for clearing up title problems
found in a search of public records – and learns in a timely
manner what information the title company needs for insuring
which expedites the underwriting process. Title insurance
personnel – by fast, accurate verification of title or by swift
resolution of a title problem – often make it possible to
promptly complete a transaction that would not have been closed
at all.
THE ATTORNEY
Title insurance enables the attorney in real estate practice to
offer his client substantially greater protection than what is
attainable with a legal opinion alone. Title insurance
safeguards against those numerous potential hazards that a
client may face, which cannot be covered by an opinion.
THE HOME
BUILDER
Delays for the home builder are minimized by calling in the
title company early. By assuring priority of first lien of
mortgage for the lender, title insurance makes construction loan
financing more attractive.
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How is the
Title Insurance Industry Regulated? |
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The Montana Title Insurance Code written in 1985 placed the
industry squarely in the insurance field. The consumer is
better protected by the Act because those in the industry
now have a clear set of operating rules and guidelines that
help to dispel uncertainties and questionable operating
procedures which previously existed. Title insurers and
their agents are regulated by the State Insurance
Commissioner and premiums are based on an established
formula that provides for overhead and operating costs,
profit incentives and a reserve for claims. Premium rate
requests must be approved by the commissioner.
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Who Orders
Title Insurance? |
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Usually a Realtor, lender or attorney. However, the
purchaser has the right to request a particular title
company.
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Do Title
Companies Only Sell Insurance? |
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Besides the basic owner and lender title policies, title
insurers offer various special coverage's including
construction loans, rights of parties in possession, survey,
zoning, forced removal of encroaching improvements, air and
subsurface rights, easements, judgments, federal tax liens
and others. Title companies also offer a variety of
services. For example, Sterling Title Services provides
information, research and report services, escrow closings
and free property profile packages, documents, notary,
courthouse records duplication and customer assistance.
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What are
Escrow Closings? |
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Title company escrow departments are beneficial partners in
the mechanics of the real estate transaction closing
process. Escrow departments serve as independent third
parties who provide depositories for the buyer’s funds and
facilitate the legal transfer of the deed from seller to
buyer. A real estate closing occurs when a buyer receives
acceptable – usually free and clear – title to a seller’s
property, and a seller receives acceptable payment – usually
cash – for his property from a buyer. Prior to closing, the
escrow officer determines if the title to the property is
free and clear, collects and sometimes prepares all
necessary closing documents, prepares the closing statement
and instruction, obtains signatures from all parties
involved and collects and disperses all funds. Finally, the
officer copies the documents for distribution to all
parties. |
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