Why Does Title Insurance Matter?

Many times, when we begin speaking to a client, they have many questions about what exactly Title Insurance is and how it benefits them. Through no fault of their own, the world of Title has remained a mystery to them. That is when we help them understand that the details of what we do translate and dictate what exactly they own and how they own it. That is why our attention to detail and processes matter so much to us, simply put, they control what you end up owning once the Real Estate transaction is complete. In this blog, we will take a comprehensive look at how Title Insurance benefits you, and why you should care about the Title Company you choose to close with.

What is Title Insurance and how does it benefit the policy holder?

The title to your house is your legal right to ownership of that property. Your ownership of the property could be blemished or jeopardized if there are any problems with the chain of title, which basically refers to the record of ownership of a particular property. The title company will become a part of the deal when a contract is entered between a buyer and a seller, and that contract calls for a title insurance policy issued through a licensed agent. Before closing, the title agent runs a title search and orders other documents such as an estoppel and a municipal lien search.

The purpose of this is to make sure that there are not any liens, unpaid taxes, wild deeds, etc. or any potential claims from previous ownership usually stemming from a signature not being obtained from a necessary party at a past closing. Title Insurance Policies help protect the new owner and the mortgage lender from prior rights or claims, liens, or other outstanding debts of previous property owners. If you own the property and have a valid title insurance policy, and someone claims ownership, the title insurance underwriter will step into your shoes and defend your title and pay all related costs and loss of property value that might ensue.

What are the fees associated?

Title insurance premiums are set by the State of Florida. Below is a chart of the sliding scale that is used to calculate the amount of title insurance you will be charged. For a more in-depth look, check out the Old Republic Title Insurance Calculator. https://www.oldrepublictitle.com/rate-calculator/florida

An example of where title insurance would be beneficial to you:

You purchase a property in 2005, have lived in that property until 2021 and are looking to sell the property. You list on the MLS, enter into a contract and start the closing process. A few weeks later the title company states that they can not close on the transaction due to a title defect. The reason for the title defect could be any number of things, but for this example, the person who sold you the property was married, and that property was their marital residence protected by Florida homestead laws. The title company who closed the previous sale did not have the spouse sign the deed, and therefore it was not a proper devise of homestead property. This would leave open the possibility of the spouse claiming an interest to the property that you now live in.

The title company will likely require a corrective deed from parties that may have passed away or left the country during the period you have owned the house. This could incur numerous expenses such as locating the parties and obtaining a new deed, or a quiet title action through the Court system to resolve the defects in the chain of title. If this is a matter that is covered under a title insurance policy, the owner of the property could alert their insurance provider, and that insurance provider would step into their shoes to resolve the matter and cover the costs associated. If you did not have a title insurance policy, you would be on your own and you would be required to pay a law firm or similar to work out every detail correcting the problem. Many of these problems can be very costly to resolve.

What is escrow?

Escrow is the process of an impartial third party, usually the closing agent, holding money for an upcoming transaction. This includes the buyer’s deposit, the lenders loan, and the buyer’s cash to close as well as any other necessary funds. The escrow agent is trusted with collecting, balancing, and disbursing the funds to the proper parties upon a successful completion of the closing. This type of escrow is different than the escrow accounts used by lenders on their loans.

After you close with a mortgage, the lender may establish an escrow account to pay for your taxes and insurance. A portion of your monthly payment will be held in the lender’s escrow account and will use that money to cover expenses such as property taxes and homeowner’s insurance premiums.

Apiary Title, LLC is a full service settlement and escrow company specializing in the Central Florida real estate market and Jarrod is our most experienced Title Agent.

He enjoys the many hats he wears, the many tasks he oversees, and the people he gets to help. Follow him by Clicking Here.