Title Insurance for Real Estate Professionals

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Title Insurance for Real Estate Professionals. CHAPTER 1 THE BASICS OF TITLE INSURANCE “What Does a Title Insurance Company Do?”. Title insurance companies "insure” “title” to “real property”. “Insure” To indemnify by providing monetary reimbursement for losses. “Title” - PowerPoint PPT Presentation

Text of Title Insurance for Real Estate Professionals

  • Title Insurance for Real Estate Professionals

  • CHAPTER 1THE BASICS OF TITLE INSURANCE

    What Does a Title Insurance Company Do?

  • Title insurance companies "insure title to real property

  • Insure

    To indemnify by providing monetary reimbursement for losses.

  • Title

    The rights of ownership in real property.

  • Real property consists of various components.

  • Real Property Components1. SURFACE

  • Real Property

    2. SUBSURFACE

  • Real Property

    3. AIR SPACE

  • Real Property

    4. RIGHTS

  • Real Property Includes Improvements.

    Attachments to real estate intended to be PERMANENT.

    Examples: houses, fences, driveways, trees, and bushes

  • Real Property Includes Fixtures. Attachments to improvements that become part of the real estate. Examples:heating, plumbing, and electrical fixtures.

  • Exceptions to Fixture RuleTrade fixtures used in a business or trade (usually when leasing).

    Emblements, or farm crops, can be sold separately from the land.

  • Chattels

    Personal property, i.e.,EVERYTHING that is NOT real estate.

    Examples:furniture, vehicles,stocks, andbonds.

  • Chattels Include:cash,contracts, andpurchase agreements.

  • Modular HousingReal or Personal Property?Is it attached as an improvementand taxed as real property?

  • RIGHTS, TITLE, AND INTERESTS

    Certain rights always belong to the government.

  • Government Rights1. Police Powers

  • Government Rights1. Police Powers

    2.Eminent Domain

  • Government Rights

    1. Police Powers

    2.Eminent Domain

    3.Taxation

  • Government Rights

    1. Police Powers

    2.Eminent Domain

    3. Taxation

    4.Escheat

  • HIERARCHY OF GOVERNMENT RIGHTS

  • Federal government has highest priority, thenstate is followed bycounty and then municipal.

  • PRIVATE RIGHTS IN LAND

    These are often discussed in terms of a bundle of rights.

  • Title insurance can insure almost any estate in real property:

    fee title, a mortgage, a land contract, an easement...

  • Three AreasTitle CompaniesExamine to Reduce Risk

  • CONSTRUCTIVE NOTICE The rights shown by the public record.

  • ACTUAL NOTICE This occurs when something can be observed, heard, or sensed.

  • RIGHTS AS CONSEQUENCE OF LAW

    Unrecorded documents, grantors under legal age, fraud, forgery, duress, insanity, incompetency, unknown heirs, undisclosed marriages, identity theft...

  • CHAPTER 2THE BUSINESS OF TITLE INSURANCE

  • Title Assurance vs. Title Insurance Title assurance is a broad termincluding surveys, maps, title opinions, and anything having to do with title.

    Title insurance is a specific contractual obligation.

  • Alternative Products to Title InsuranceCasualty insurance products

    Borrowers credit score

    Owner and encumbrance reports

  • Title Insurance Protects Everyone

    Lenders, buyers, andreal estate agents

  • Lenders Title policies indemnify lenders against loss.

    Use standardized formsandhomogenize state laws.

    Help home ownership by makingsale of mortgages easy.

  • The Secondary Market This ensures a constant source of money for housing.Financiers require title insurance toprotect their investment.

  • Title Insurance Protects Homeowners and Their Investment

  • Title Insurance and the Real Estate Agent BEWARE!

    Never tell your buyer they dont need an owners policy. You may be at risk if there is a problem later!

  • Title Companies may insure over or provide affirmative coverage for problems for lenders.

    Insurance over a title problem is often available to the owner.

    Ask for it!

  • Recognize a Notice of Title Defect.

    It is information important to the buyer.!!!

  • Owner Policy Is Different From Lender Policy

    Owners policies are for the full sale price of the property.

  • Owner Policy Is Different From Lender Policy

    Lenders policies only cover the loan amount,not buyers equity.

  • Owner Policy Is DifferentFrom Lender Policy

    Owners coverage can last forever, as in corporate ownership or a trust.

  • Owner Policy Is DifferentFrom Lender Policy

    Mortgage policies decrease in value as the loan is paid down and expire when the loan is paid off.

  • A title company is either a title insurer (a.k.a. title underwriter)

    or a title agent.Title AgentTitle Underwriter

  • Title insurers take liability under the policy.Title agents write policies of title insurers.

  • Closing Liability vs. Title Insurance Liability

  • Title policies indemnify onlytitle issues

  • Protect the Lender & Buyer Closing protection letters from the underwriter indemnify closing errors and theft of funds by a title agent.

  • CHAPTER 3

    MYTHS AND TRUTHS

  • TOP SIX MYTHS ABOUT TITLE INSURANCE

  • MYTH Title insurance is a guarantee of good title.

  • TRUTH Title insurance cannotguarantee good title.

    Fraud, forgery, misrecordedor unrecorded documents,and undisclosed heirs all cause loss of property.

  • MYTH

    When a lenders policy is issued, title must be good.

  • TRUTH

    Even though a lenders policy exists, title may not be good.

    Title companies take calculated risks.

  • MYTH Title insurance is like other forms of insurance.

  • TRUTH

    Title insurance is not like other types of Insurance

    Title insurance covers past risks, not future riskslike fire insurance.

  • Title insurance is not likeother forms of insurance.

    What the consumer does to their own title after they purchase propertyis not covered.

  • Title insurance is not like other forms of insurance.

    The title industry is one of risk elimination not risk assumption.

  • Title insurance is not like other forms of insurance.

    Investigating title in order to insure itis expensive.

  • Title insurance is not like other forms of insurance.

    Title issues today are riskier than those in the past because of fraud, forgeries, etc.

  • MYTH

    Very few files have title problems.

  • TRUTH

    One in four files have title problems!

  • MYTH

    Title companies rarely pay.

  • TRUTH

    Title claims are skyrocketing!

    In 2003 title industry paid out $661.7 million in claims

  • Title companies pay.

    Remember:Title insurance covers fraud, forgery, incompetence, duress, errors in records, survey issues, identity theft, and more.

  • Real estate is a detailed and complex business withmany places to make mistakes.

  • Title policies provide a contractual duty to defend any covered claim, valid or not.

    Defending a claim is costly.

  • CHAPTER 4

    HOW TO READ TITLE WORK LIKE A PROFESSIONAL

  • A title commitment is the document that shows all title research done on a propertythrough a particular date.

    It is used to prepareclosing documents.

  • Understanding the Layout of a Title Commitment

  • Cover sheet or jacket

    Standard language pertainingto terms of the policy

  • Schedule A

    Identifies the property, the insured,policy amounts,how seller holds title, and aprecise legal description.

  • Schedule B

    The meat of the titleand key to closing.

    Where to concentrate your efforts.

  • Title Exceptions Found on Nearly All Properties

  • Real estate taxes are a government right.

    They are handled at closingper the purchase agreement.

  • Assessments,a charge for the improvement of property.

    Handled at closing per the purchase agreement.

  • Easements are authorized uses of land for a specific purpose.

  • Types of Easements

    Utility and drainage easements are most common.

    Consumer should be aware of their location and size.

  • Types of Easements

    Blanket easements cover a large tract of landwithout being specifically located.

  • Types of Easements

    Common driveway easements occur when two adjacent parcels share access.

  • Types of Easements

    Wetlands or environmentaleasements require the owner NOT to changethe habitat.

  • Mortgages/deeds of trustpledge the property as security for a loan.

  • Covenants, Conditions, and Restrictions (CC&Rs)

    These can be deed restrictions i.e., restrictions contained within a single deedto limit use of property.

  • Covenants, Conditions, and Restrictions (CC&Rs)

    These most often cover an entire subdivision.

  • Common interest communitiesoccur when owners sharesuch things asaccess, party walls,parking, and utilities.

    CC&Rs cover these issues.

  • Covenants, Conditions and Restrictions

    Be sure the buyer readsthese before the closing!

  • UNDERSTANDING AND REMOVING TITLE ISSUES

  • Understand the language so you can resolve the problem.

    Encumbrancesany claim on title.

    Liensa type of encumbrance that can be removed with money.

  • Liens are classified as specific liens or general liens

  • Examples of Specific LiensSpecific liens attach to specific real estate. Mortg