Answers to Questions about Title Insurance

Buying a home is, for many of us, the biggest single investment we'll ever make. Knowing this, most homeowners provide for security and safekeeping of their homes by insuring them against hazards such as fire, theft and water damage.  But there is another hazard that can pose an even greater risk to homeownership: Defects in the title to your property can cause you to lose part or all of the investment in your home.

What is title insurance and why do you need it? We've listed the answers to these and other commonly asked questions.  This may help you better understand the value of title insurance in protecting your home ownership. The general real estate information will help make the home-buying process a smoother one.

What is title?

A title is the right to and property ownership of property. It includes the right to possess, mortgage, lease and sell the property.

Why is transferring the title to real estate different from transferring the title to other items, such as a car?

Because land is permanent and can have many owners over the years, various rights in land may have been acquired by others (such as mineral, air or utility rights) by the time you come into possession of it, even if the land has never been built upon. In order to transfer a clear title to land, it is first necessary to determine whether any rights are outstanding.

What kinds of problems can a title search reveal?

A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting use of the land. Some restrictions may actually improve the value of property, such as neighborhood restrictions that promote quality houses.

Are there any problems that a title search cannot reveal?

Yes. There are some "hidden hazards" that even the most diligent title search may not reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you've purchased your home and can jeopardize your right to ownership.

What is title insurance?

Title insurance is your policy of protection against loss if any of these problems covered by your policy-even a "hidden hazard" - results in a claim against your ownership.

How does title insurance protect my investment if a claim should arise?

If a covered claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense- and pay all court costs and related fees. Also, if the covered claim proves valid, you will be reimbursed for your actual loss up to face amount of the policy.

How much could I lose if a claim is filed against my property?

That depends on the claim. In an extreme case, you could lose your entire home and property- and still be liable to payoff the balance of your mortgage. Most claims aren't that dramatic, but even the smallest claim can cost you time, money and aggravation, and you may have to pay for costs for legal defense.

Would an abstract show property limitations or restrictions?

Maybe-and maybe not. An abstract is a history of the property title as revealed by the public records. Abstracts may contain errors and do not disclose "hidden hazards" that can threaten your property title if you do not have a title insurance policy.

The owner of the property has a deed. Isn't that proof of ownership?

Not necessarily. A deed is just a document by which the grantor's ownership in land is transferred, whatever that right may be. It's not proof of ownership, and doesn't do away with rights others may have on the property. In­ addition, a deed won't show you liens or claims that may be outstanding against the title.

The owner of the property I want to purchase has lived in the home for only six months. He had a title search done six months ago. Why do I need another one?

Because the owner could, in a very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. He could get married or divorced, or have a lien filed against him or the property. It is necessary to conduct an up-to-date title search to uncover any such problems.

If the builder of my home already has title insurance on the property, why do I need it again when I purchase the land from him?

A title policy insuring the builder does not protect you. Also, a great many things could have happened to the land since the builder's policy was issued. Liens, judgments and unpaid taxes for which prior owners were responsible may be disclosed after you purchase the property-causing you aggravation and costing you money.

What about an attorney's opinion?

An attorney's opinion is based on a search of the public records. So, once again, even the most exhaustive search of these records may not reveal everything. Unlike a title insurance company, an attorney is not liable if you should suffer loss because of "hidden hazards" in the title that would be covered in a title policy.

Are there different types of title insurance?

Yes. Basically there are two different types of policies- a Mortgagee's policy and an Owner's policy. The Mortgagee's policy protects that lender's lien against the property under the buyer's mortgage. The owner's policy safeguards the buyer's investment or equity in the property up to the face amount of the policy.

How long does my coverage last?

For as long as you or your heirs retain an interest in the property and, in some cases, even beyond.

How much does title insurance cost?

Probably less than you think. The Texas Department of Insurance regulates the rates that title companies may charge, but generally speaking the cost of title insurance (including search, examination and related services) amount to about one percent, or less, of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time, usually at settlement or the "closing" of the property.

Where can I get title insurance?

Hexter-Fair Title Company has been a North Texas Institution since 1916. We proudly serve the real estate community through our 17 branch offices conveniently located throughout the Metroplex. With our Texas roots we insure your title through the nation's largest most secure underwriters. When choosing a title insurer, it is important that you look for a company with expertise and experience, as well as the financial strength to protect you should a claim arise.