YOUR PLACE TO CALL HOME: Title insurance protects you from the past

2014-08-20T00:00:00Z YOUR PLACE TO CALL HOME: Title insurance protects you from the pastKen Hill stltoday.com
August 20, 2014 12:00 am  • 

New homeowners Sam and Jill Brown got a knock at their door one afternoon and were surprised to find a process server who was there to serve them with notice they were being sued by the estate of John Johnson, who claimed to own their home. The Browns were completely surprised because they bought their home from the estate of Esther Smith.

Apparently, Esther and John met during a trip to Las Vegas many years ago and got married in the spirit of the moment. Realizing what they had done on Monday morning, John told Esther he would take care of everything and get the marriage annulled. Although she never married again, Esther was embarrassed by the whole thing and never told anyone about it. Unfortunately, John never followed through on his promise; therefore, they remained legally married and he had a marital interest in Esther’s estate.

Fortunately, when they bought their home, the Browns’ real estate agent recommended they purchase title insurance on their new home. After they received the court papers, the Browns called their title company. The title company made a cash settlement to John, and the Browns were able to keep their home. While the names have been changed, this story is based on a true story and illustrates why title insurance is an essential part of your home purchase.

When we purchase most types of insurance, like health, auto or homeowners, we protect ourselves from future problems. Title insurance is different; it protects you from the past. It insures your interest in your home from the day you purchased it backwards. It is your insurance that the previous owner, or owners from many years ago, legitimately owned the home; and no one else has a legal claim on your home.

Which title company you use is your choice; your agent will provide you names of title companies that have done good work for their customers and clients in the past. Under the provisions of the contract used by agents in this area, you have the option to research the title to your new home and obtain a survey of the property. You have 25 days to complete these tasks and ask the seller to correct any defects that are discovered. If unacceptable conditions are found and the seller does not correct them, you have the right to cancel your contract. As you can see, it is very important to select a title company with the ability and the resources to meet the deadlines on your contract.

If you have a car accident or a loss at your home, it is the insurance company, or underwriter, and not your local insurance agent, that will deal with the problem. The same is true when it comes to title insurance. If you have a claim, you will need to contact the insurance underwriter, not the local office or agent. Therefore, it is important to choose a title company with an underwriter with a record of sound financial performance and claims management.

Finally, you can compare prices. Title companies are required to give you a price breakdown that shows their price for researching your property, insuring your ownership, and closing the transaction for you and the seller. The State of Missouri regulates the prices the companies may charge you for the actual insurance policy. The costs for title search and closing may vary from company to company.

Once you have determined which title company you want to do business with and you have an accepted offer on your new home, your agent will forward your purchase offer to the title company and their work begins. Before they agree to insure your new home, the title company researches the public records on the property and the sellers. They review all the recorded information regarding the property to determine ownership. They will also review any liens filed against the property and check that the taxes are up to date.

In addition, they will review the sellers’ public records. Do the sellers have any outstanding legal judgments against them? Have they been sued for unpaid bills? Are they up to date on any child support or alimony obligations? Are there any financial or legal obligations that can’t be satisfied at closing? Does anyone other than those signing the sales contract have a legal interest in the property? Since your lender will also be getting title insurance, the title company will also research you. They will determine if you have any debts or obligations, like bankruptcy, child support or overdue taxes, which could take priority over the lender’s interest in your home.

Once they have reviewed all this information, if they find nothing that cannot be corrected at closing, they will issue you a commitment for title insurance. This document will be sent to you and your agent. You will want to review this carefully before your 25 days has expired. In addition to the information on ownership and liens on the property, the title commitment and survey will contain information on easements that have been recorded on your property. Knowing where the easements are located is especially important if you are planning any additions or improvements to your new home.

Once they have agreed to insure your new home, the title company works with your lender and agent to prepare the documents to complete your purchase. Title insurance is a vital part of ensuring you and your family can enjoy your new home free from any surprises or claims from the past.

Remember not all real estate agents are Realtors. Be sure to ask your agent if she is a member of the St. Charles County Association of Realtors.

Call your St. Charles County Realtor today!

Ken Hill is the 2014 president of the St. Charles County Association of Realtors. Email to comments@StCharlesREALTORS.com if you have any real-estate related questions or comments you would like to see addressed in this column.

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