When the word “title” is used, it refers to identifying the owner of real estate property. For real estate, the title document is called a Deed. It is the foundation of who owns the real estate.
What Does Title Insurance Cover? Title insurance protects the Buyer of real estate from losses, and legal fees, the Buyer could suffer in the event there is a ‘defect in title’. Often, these defects in title are not discovered until years after the Closing on the purchase by the Buyer.
TITLE CLOSING LAW FIRM PROVIDES THE TITLE INSURANCE THROUGH ITS UNDERWRITER – OLD REPUBLIC INSURANCE
What ‘Defects in Title’ can Occur? Often occurring by accident, and sometimes due to improper actions by others, title defects can include:
- Fraudulent Sellers who pretend to be the rightful Owner
- Errors in the recording of legal documents from the Closing such as a Deed
- Mistake by the County Recorder in recording a Mortgage or Satisfaction
- Unpaid taxes or assessments
- Unreleased mortgages
- Unpaid judgments or liens
- Lack of mental capacity of the Seller
- Improper execution of the Closing documents
- Forgeries or fraud in the Closing transaction
- Undisclosed or missing heirs of a deceased Seller
How Much Does Title Insurance Cost? Title Insurance cost is paid for via a one-time premium that is paid at the time of the Closing. The Title Agent collects the premium at the Closing and issues the Title Policy to the Buyer. The premium amount is set by Florida Statute 627.7825 and the Florida Administrative Code, Chapter 4-186, and is based on the Purchase Price. The title insurance rates are:
$5.75 per $1,000 for the first $100,000;
then, $5.00 per $1,000 should be added over $100,000 up to $1 million;
$2.50 per $1,000 over $1 million up to $5 million;
$2.25 per $1,000 over $5 million up to $10 million;
and $2.00 per $1,000 over $10 million coverage.
What is Owner’s Title Insurance? An Owner’s Title Policy is designed to protect Buyers from covered title defects that existed prior to the issue date of the policy. If a valid claim is filed, the Buyer’s Owner’s Policy, subject to its terms and conditions, will cover financial loss up to the face amount of your policy.
What is Lender’s Title Insurance? A Lender’s Policy does not provide coverage to the Buyer. A Lender’s Policy ensures that the Buyer’s lender has a valid, enforceable lien on the Buyer’s property. Most lenders require borrowers/Buyers at their Closing to purchase this type of insurance policy to protect the Lender’s investment. If a Buyer is paying cash, a title policy may not be required, however, it is highly recommended for many reasons.
Is Title Insurance Required? Title Insurance is generally not required, at least not by Florida law. However, when a Lender is involved, the Lender will require a Title Insurance policy be acquired. Moreover, a Lender will require that an Owner’s Policy as well as a Lender’s Policy be purchased for the Closing. When a Buyer is paying cash for the purchase, it may be optional for title insurance to be purchased. However, it is highly recommended for many reasons. The Title Insurance protects against Defects in Title that do occur throughout Florida. They occur regardless of how thorough the Title Agent or anyone else involved in the Closing transaction may have investigated the Title. Moreover, the Title Insurance not only covers the loss but also pays for legal fees for the Buyer to defend or prosecute a title claim.
Common Terms for Title Insurance:
Abstract of Title is a compilation of instruments dating back to earliest public records and includes physical copies of all recorded instruments affecting title to lands being searched. An alternative method involves searching the records for 30 years from the date of a valid root of title.
Clear Title is a title free from defects which may encumber the owner’s right to the peaceful enjoyment of the property or which may cause the owner to lose any portion of it.
Cloud exists on the title when there is reason to believe there could be a future claim against the title to the property.
Closing Disclosure is a document that replaced other closing forms beginning August 1, 2015; specifically, the HUD-1, Good Faith Estimate (GFE) and the Truth in Lending Act (TILA) forms. This form will display the involved monetary amounts related to the closing.
Earnest Money is usually required from the buyer in order to show their sincerity in entering the contract to purchase property.
Easements as defined by the Florida Supreme Court are legal rights imposed on actual and physical property; a privilege without profit under which the owner of one property has a right to enjoy that interest over the property interest of another person. An easement is recognized as a legal right of the person using it.
Eminent Domain is the government’s constitutional right to take private property for public use and reimburse the record title holder for the reasonable cost of the land.
Lis Pendens is a formal notice of a pending law suit.
Primary Title Services should be recorded on the Closing Disclosure Form and include: evaluating the title search records; clearing underwriting obstacles; determining insurability; preparing and issuing the title commitment and title insurance policy. These charges are included in the title insurance premium.
Property Encroachment occurs when one person’s property extends onto the property of another. This can include fences, bushes, sheds, etc.
Related Title Services are commonly referred to as closing services and should be recorded on the Closing Disclosure Form. The examination of records is no longer a part of closing services as it is considered part of the primary title services. Closing services include: services performed by the licensee; preparing the documents for the closing; conducting the closing and disbursing the funds from the closing.
Restrictive Covenants prohibit, limit or regulate the use, character, kind, dimensions, specifications and locations of the buildings and structures that may be erected and maintained on the land.
Simple Escrow is a closing in which no title insurance is issued.
Title Commitment is a binder for title insurance.
Title Defects are competing or adverse interests in the property’s ownership, usually found upon an evaluation of the documents from the title search.
Title Search is the compiling of title information from official or public records. The title search provides a summary listing of all the past documents affecting title to the land being purchased.
Writ of Interpleader is a court order that directs the escrow holder (a title agency, company, or attorney) how to disburse the escrowed funds in question.