The deed to your new home is not enough to ensure clear title: it is merely an instrument whereby the seller transfers right of ownership to you. It doesn’t prove that the person described as the seller is actually the clear owner, and it does not eliminate claims or rights that others may have in the property. You cannot determine from the deed what rights, liens, or claims may be outstanding against your title.
You should be protected against any undiscovered claims that may arise in the future to threaten your title. A title insurance policy from provides this twofold protection in accordance with your instructions and within the parameters of the policy. Although your mortgage lender will most likely have a title insurance policy, it only protects the lender’s interest in the property, not your investment, and it decreases as the mortgage is paid off. You need owner’s title insurance to protect your ownership for the full amount you paid for the property.
How Does it Work?
The title company conducts a thorough search and evaluation of the Public Records, looking for situations that may cloud the title to your new home, such as:
• Are all Taxes and special assessments paid?
• Does anyone have special rights to the property that would limit your ownership?
• Has the death of a former owner or the filing of a will, affected title to the property?
• Are there any lawsuits or claims recorded against the property itself, or suits or judgments filed against the seller?
What about Hidden Risks?
Claims that cannot be discovered by examination of the Public Records, called “hidden risks”, could arise long after you’ve purchased the
property. Here are just a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title:
• False impersonation of the true owner of the property.
• Forged deeds, releases or wills.
• Undisclosed or missing heirs.
• Instruments executed under invalid or expired power of attorney.
• Misinterpretations of wills.
• Deeds by persons of unsound mind.
• Deeds by minors.
• Deeds by persons supposedly, but in fact married.
• Liens for unpaid estate, inheritance, income or gift taxes.
• Fraud.
What about premiums?
Unlike most forms of insurance, you pay for a Title Insurance policy only once, and this relatively modest charge insures your title for as long as you or your heirs own the property.
What is the Preliminary Title Report?
The Preliminary Report is an offer to issue a policy of title insurance covering a particular estate or interest in land subject to stated exceptions. Since these exceptions may point to potential problems with your intended purchase, it is important for all parties to review the report once it is received. A Preliminary Report provides a list of the matters which will be shown as exceptions to coverage in a designated policy or policies of title insurance, if
issued currently, covering a particular state or interest in land. It is designated to provide an interim, or “preliminary” response to an application for title insurance and is intended to facilitate the issuance of the designated policy or policies. It is normally prepared after application (order) for such policy(ies)
of title insurance on behalf of the principals to a real property transaction, for the purpose of facilitating requirements relative to closing and policy issuance in form and content approved by those parties.
If a title policy is not contemplated, a Preliminary Report should not be ordered. Instead, consideration should be given to requesting a Condition of Title Report or other similar title product.
The Preliminary Report states on its face that it is made solely to facilitate the subsequent issuance of a title insurance policy and that the insurer assumes no liability for errors in the report. Accordingly, any claim arising from a defect in title must be made under the title policy and not the Preliminary Report.
After a title order has been placed, matters relative to the title policy coverage on the subject property are assembled in a title search package and examined by skilled technicians. This is when the Preliminary Report is prepared and sent to the customer. The report contains relevant information so that the parties to the transaction will become aware of matters which will not be insured against by the title company. This report is issued before the title policy, hence the name Preliminary Report.