Most kinds of insurance are self-explanatory.

    Fire insurance protects against losses from fire.  Collision insurance guards against the cost of a crunched car.  Theft insurance - well, you get the point.

    But title insurance?  What does it mean to insure your title to real estate?  And what are the risks that make title insurance important?

    Centennial Title Incorporated has been asked these questions before.  Here's how we answer them.

 

A WORD ABOUT REAL ESTATE

    Real estate has always been considered man's most valuable possession.  It is so basic a form of wealth that many special laws have been enacted to protect ownership of land and the buildings which stand on the land.

    You should realize whenever you buy property that the owner who is selling it to you has extremely strong rights as do his family and heirs.  Also, there may be others - in addition to the owner - who have "rights" in the property you are going to buy.  These may be governmental bodies, contractors, or individuals who have perfectly proper unpaid claims against the property.

    Anyone who has such a claim is, in a sense, a part- owner.  The property may be sold - to you - without the party who has a claim knowing about the sale.  And you  may know nothing about such a claim at the time you buy.  It doesn't matter.  Such claims may remain attached to the real estate you have purchased.

 

WILL YOU GET A CLEAR TITLE?

    It is of the greatest importance that you do.  But this means that you must be informed about any of these claims against your land so that you can make certain they are cleared up before you buy.  And it means that you must be protected against any undiscovered claims that may arise in the future to threaten your property.  Title insurance provides this two-fold protection.

 

HOW DO YOU LEARN WHAT CLAIMS THERE ARE AGAINST THE PROPERTY?

    By a search of the public records.  This is the first step we take in order to insure your title.  We keep track of every entry on all these public records which might affect the title to every parcel of land.

    Some of the things a title search uncovers are any unpaid taxes or mortgages, judgments against previous owners, easements, and many other court actions or recorded documents which can affect title to real estate.

    We find and report such defects in the title to the real estate you wish to buy, so that these matters can be corrected and cleared up.  It is the first benefit you receive when title insurance is ordered.

 

WHAT IF THERE'S A DEFECT IN THE TITLE WHICH DOESN'T SHOW UP IN THE PUBLIC RECORDS?

    This can happen.  We call them "hidden risks" - the undiscovered claims which may arise long after you have bought your home.  Protection against loss from claims on real estate which cannot be discovered by examination of the public records is the second part of the two-fold benefit which title insurance provides.

    The title to the home you have paid for - and to which you have received a deed - could be seriously threatened or completely lost by such circumstances as a forgery, confusion due to similar names, error in the records, to cite just a few hazards.

 

HOW DOES A TITLE INSURANCE POLICY PROTECT AGAINST THESE DANGERS?

    If a claim is made against your title as insured, your policy protects you by:

    1.    Defending your title, in court if necessary.

    2.    Bearing the cost of settling the claim if it prove

           valid, in order to perfect your title and keep you

           in possession of your property.

 

BY NOW, YOU KNOW THE ANSWER TO:  WHAT IS TITLE INSURANCE?

    It is assurance that every possible cloud on the title to the land you are buying - which can be discovered from public records - has been called to your attention so that such defects can be corrected before you buy.

    It is insurance that, if any undiscovered claim covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed, exactly as your title insurance policy provides.

 

Other Frequently Asked Questions:

 

	What does title insurance provide? Defending your title, in court if necessary. Bearing the cost of settling a claim if it proves valid, in order to perfect your title and keep you in possession of your property. Your policy, for a one time fee, remains in effect as long as you or your heirs retain an interest in the property.
	Here are a few examples of what title insurance protects against: False, impersonation of the true owner of the property. Forged deeds, releases or wills. Undisclosed or missing heirs. Instruments executed under expired or invalid power of attorney. Mistakes in recording legal documents. Misinterprentations of wills. Deeds by persons of unsound mind, minors or persons supposed single, but actually married. Liens for unpaid taxes. Fraud The list goes on & on.......
	What's in a title search? Chain of title. Simply put, is a history of ownership.  By seaching public records and in Cook County, if the property is in Torrens, a search of the torrens certificate. Tax Search. Determine present status, and a check to reveal all previous years & special assessments are paid. ROP - Report on Possession. This is a physical inspection to determine: Location of improvements. Unrecorded easements or interests apparent. Who is in possession. Note:  Due to competition and the necessity for quick turn around time for commitments, surveys and affidavits are relied upon and are the norm, more often than not. Judgment & Name Search. One of the most important parts of the title search.  This determines if there are any unsatisfied judgments against the seller or previous owners. The definition of a judgment is:  A judgment is a general lien against a debtor's real estate & constitutes security for any money owed under the judgment.  Therefore, the property can be sold to satisfy the judgment. A commitment letter is issued. After diligent inquiry and examination of the previous searhes, a letter of commitment to issue policy is written and sent to seller and buyer attorneys. Note:  For most buyers, there is a lender, therefore a commitment letter would be sent to their attention , as well. The mortgage lender is as concerned as the buyer about the quality of title, because, the property is to be security for the new loan. This is why lenders often request a simultaneous policy issued insuring their mortgage as a first lien on the land.
	Closing Service. The closing when conducted by the title company: Acting in a fiduciary capacity, the title company will handle the transfer of all appropriate funds between buyer, seller, lender and all other interested parties.  The parties meet at a mutally convienent time and location.  All documents are explained, executed and exchanged.  The transaction is reviewed and approved, and the title company collects and disburses the monies. Note:  Cash reserves are necessity to inquire as to underwriter or insurer of deposits. Guarantee of policy. Insured closing letter.
	Costs. The cost is remarkably low for the service performed.  It is one of the least expensive closing costs. For example for sellers it includes: Insurance County & State transfer tax Release recording fees, if any For buyers it includes: Mortgage policy Endorsements, if any Deed & Mortgage recording fees Closing fee What is a title?  A title is the foundation of property ownership.  It is the owner's right to possess and use and transfer the property.

Why is transferring title to real estate differ from transferring to title to personal property, such as a car?

 

What is a title search? A title search is a detailed examination of the historical records concerning a property. These records include deeds, mortgages, court records, property and name indexes, taxes and many other documents. The purpose of the search is to verify the property owner's right to sell or finance the property and to discover any claims or defects to the property.

What kind of problems can a title search reveal? A title search can reveal several types of defects in title, liens, encumbrances and restrictions. Among these are unpaid taxes, easements, unsatisfied mortgages, judgments against the property owner and restrictions of use or transfer.

 

What is title insurance? Title insurance is a policy of protection against loss if any of the problems listed above result in a claim against your ownership.

 

How does title insurance protect my investment if a claim should arise? If a claim is made against your property, title insurance, in accordance with the policy, will assure your legal defense, including paying court costs and related fees. If the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.

 

What are the different types of title policies? There are two types of title policies- a lender's policy and an owner's policy. The lender's policy protect the lender's interest in the property as security for the outstanding balance under the buyer's mortgage. The owner's policy protects the buyer's investment in the property up to the face amount of the policy.

 

What is a HUD Settlement Statement (HUD-1)? This is a summary of the financial portion of the real estate transaction. The HUD will list the purchase price, loan amount, closing costs for both buyer and seller and show all pro-rations and sums to be disbursed by the title company to all parties.

 

What is pro-ration of property taxes? This is the process of charging either the buyer or seller for their share of real estate taxes owed on the property for their respective time of ownership. Taxes are said to be "pro-rated" back or forward to the due date of the property taxes.

 

What is pre-paid interest? This is interest due from the date of a loan closing to the first day of the following month. Most loans require payments to be due on the first day of the month. Each monthly payment reflects the principle and interest due on the loan for the previous month. A loan closing on the 20th day of the month will require interest adjustment through the 1st day of the following month. The first payment will then be due on the 1st day of the month following. Interest adjustment is considered a settlement charge and will be disclosed on the HUD.