Title Insurance Explained
People are often puzzled by title insurance. That’s not surprising, as it is not something you purchase everyday — and it is a lot different from most insurance policies you normally deal with.
To understand title insurance, you need to break it down into two major components– information and insurance– since your title work will require some of each. When you look at it in this manner the product and its pricing make a lot more sense.
The “insurance” portion of title insurance is fairly small. Your title policy basically protects you against a specified category of risks relating to “defects” in the title to the property you are purchasing. These include forgery, mental incompetence of a party, lack of access to a public right of way or a lien or claim of interest in the property that was not disclosed to you. Your policy covers you for actual financial loss as well as attorneys fees incurred in defending your title.
Information is the main component of your title work. We exhaustively research the public records to find out the status of the title to the property–who owns it, any mortgages or liens that encumber the title, the presence of building restrictions or easements that limit the properties use and the status and amount of the property taxes. This can be a daunting task, as these records are scattered among county, township, city and village offices. (Over 40 in Washtenaw county!) It is made even more difficult by the fact that documents affecting title to land can be over 100 years old, necessitating a lengthy search through dusty records!
Our title research is integrated with your purchase and mortgage commitment documents in a document called the “Commitment for Title Insurance”. The Commitment is a road map to closing–it sets out the specific steps that must be taken (record Deed, record Mortgage, release existing Mortgage, pay taxes etc.) in order to close and insure your transaction. The Commitment also discloses items that affect your use and enjoyment of the property–such as building and use restrictions and easements. The title research and legal analysis contained in your Commitment are a great value – because of our specialized experience we can prepare these documents for a fraction of what it would cost to have an attorney do the same work!