What is Title Insurance? and why is it important that you choose your own Title Insurance Agent more than ever?
When buying a property, Title Insurance is purchased to protect you in case there is a problem with the title (ownership) of that property.
First an update. The processing of Real Estate Closings has changed dramatically.
Many consumers are not aware of the sweeping overhaul that was instituted.
These changes make it even more necessary for you to specifically choose your Title Insurance Agent.
For decades the HUD-1 settlement form, The Good Faith Estimate (GFE) and The Truth in Lending Act (TILA) disclosure were the main required forms for real estate closings. We are all familiar with these. But, these forms have been retired.
Replacing them are two new forms: the Closing Disclosure and the Loan Estimate.
There are also new rules for the closing procedure. One rule requires all forms to be ready three days prior to closing.
Many people don’t realize that they can choose their Title Insurance Agent and allow a realtor, mortgage person or attorney to choose one for them.
I strongly urge you to choose your own.
Just as you specifically choose your CPA, specifically choosing the correct Title Insurance Professional can be just as significant.
When you are in a position to need Title Insurance, and if you don’t have a trusted Title person already, please reach out to me as I can introduce you to Title Insurance professionals I trust.
Here are a few situations you may encounter where Title Insurance is needed:
When you purchase your home. How can you be sure that there are no problems with the home’s title and that the seller really owns the property? Problems with the title can limit your use and enjoyment of the property, as well as bring financial loss. That is what a title search and title insurance are for.
When you refinance. You are obtaining a new loan, even if you stay with your original lender, that lender will usually require a new title search and Loan Policy to protect their investment in the property. You will not need to purchase a new Owner’s Policy; the one you bought at closing is good for as long as you and your heirs have an interest in the property.
After all this searching and examination, a title problem may still be hidden or missed, such as:
- A forged signature on a deed
- An unknown heir who steps forward to claim ownership of the property
- An expired or forged power of attorney used during a property transfer
- An incorrect public record
In each of these cases and many more, when there is appropriate title insurance coverage, a policy will offer financial protection. The title insurer defends the title and either perfects the title or pays valid claims.
Case Study:
Property Extends On to Adjoining Land – Harvey’s Garage
Harvey was a happy new homeowner who delighted in his hobby, that is, his Harley Davidson Motorcycle. Harvey would never think to leave his Harley out of the garage and exposed to the elements. That was exactly the threat he had to face not three months after moving into his new home. It seems that some year ago, through inadvertence, a prior owner of the property built the garage two feet over onto their neighbor’s land.
One morning Harvey’s neighbor woke up to the possibility that the garage was over the property line as he thrilled to the thunderous sound of the Harley being taken out for a spin by Harvey. The next day the neighbor, Jack, contacted his surveyor.
Harvey was in a sorry state until he searched through his closing documents and found his title policy. Fortunately, the threat of a forced removal of Harvey’s garage because it extended onto adjoining land was a covered title risk in Harvey’s title policy.
Both Harvey and Jack wanted to be good neighbors, but a solution was necessary. Jack contacted his lawyer who drafted a lawsuit seeking to require Harvey to remove his garage from Jack’s land. The title insurer was notified and the insurer suggested a mediation of the dispute to spare everyone frustration and expense. Fortunately, the mediator structured a reasonable settlement which required a fair amount of soundproofing material in the garage and a cooperative neighborly respect between both Harvey and Jack. The garage was allowed to stand on its original foundation, sound proofing was added at the title insurer’s expense and a lot line adjustment was worked out, also at the insurer’s expense. Harvey and Jack could now live next to one another without controversy, thanks to Harvey’s title insurer.
As always, please contact me with any tax, accounting or business questions and to schedule a consultation.
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Please reach out to me without hesitation with any tax, business or accounting question, and to schedule a consultation.
Tax Laws are complex.
It is very easy to make mistakes that can incur penalties.
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Remember,
“If We Aren’t Working For You, Then You Aren’t Working At Your Best”
Chris Whalen, CPA
(732) 673-0510
81 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com
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