A word about Real Estate
Real estate has traditionally been a family's most valuable asset.  It is a form of wealth that is protected by many laws.  These laws have been enacted to protect one's ownership of real estate and the improvements located on the land. 

The owner, the owner's family, and the owner's heirs have extremely strong rights in and to the property that you are purchasing.  In addition to the owner, there are many others who have rights or claims in and to the property you are buying.  Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the Internal Revenue Service, or various other individuals or corporations.  The real estate may be sold, to you without the knowledge of the party having a right or claim in and to the property.  In addition, you may purchase the real estate without having the knowledge of these rights or claims.  In either event, these rights or claims remain attached to the title to the property that you are buying until they are extinguished.

The past can determine your future
Generally, a person thinks of insurance in terms of the payment of future loss due to the occurrence of some future event.  For instance, a party obtains automobile insurance in order to pay for future loss occasioned by a future "Fender bender" or for the future theft of the car.  Title insurance is a unique form of insurance.  It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., events prior to the acquisition of the property.)  These risks are far less obvious than those protected against the automobile insurance, but can be just as devastating.  The following information will answer some commonly asked questions about title insurance.

Will you get clear title?
It is of utmost importance that you receive clear title to the property when you purchase real estate.  In order to so so, you must first be informed of any existing rights or claims that may be asserted by any party against the title to the property.  Any of those rights or claims that are unacceptable to you must be resolved or extinguished prior to your purchase of the property.  In addition, you will want to be protected against any past undiscovered rights or claims that may, may, in the future, threaten your title and possession to the property.  Title insurance provides you with this twofold protection.

How do you find out what claims exist?
In order to determine the status of title, a diligent search of public records for those documents associated with the property.  Those recorded documents are examined carefully in order to determine if there are any rights or claims that may have an impact upon the title of the property.  The title search may reveal the existence of title defects, liens or encumbrances, upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners, easements, restrictions and court actions.  These recorded defects, liens and encumbrances are reported to you prior to your purchase of the property.  Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction.  In addition, you are protected against any recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the coverage of the particular policy issued in the transaction.  This is the first benefit you receive from title insurance.

What about undiscovered claims?
The title to the property that you have purchased could be seriously threatened or lost completely by hazards which are considered "Hidden risks." "Hidden risks" are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by search and examination of those public records.  Matters as forgery, incompetency or incapacity of the parties, fraudulent impersonation, and unknown errors in the records are examples of "Hidden risks" which could provide a basis for a claim after you have purchased the  property.  In order to protect you against this possibility a title insurance coverage will take care of those "Hidden risks".  This is the second benefit your receive from a title insurance.

How does a title insurance policy protect against all these claims?
If a claim is made against your insured title, the title insurance company protects you by:
(1) Defending your title, in court if necessary at no cost to you, and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.

Title insurance protects your asset
Title insurance gives you the assurance that possible clouds on title to the property you are purchasing - which can be discovered from the public records - have been called to your attention so that such defects can be corrected before you buy.  Additionally, it is insurance that if any undiscovered claims 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.

Only one premium
Unlike other forms of insurance, the original premium is your only cost as long as you or your heirs own the property.  There are no annual payments to keep your Owner's Title Insurance Policy in force.

                                              Twenty Reasons for Title Insurance
1.  A fire destroys only the house and improvements.  The ground is left.  A defective titled may take away not only the house but also the land on which stands.  Title insurance protects you (as specified in the policy) against such loss.

2.  A deed or a mortgage in the chain of title may be a forgery.

3.  A deed or a mortgage may have been signed by a person under age.

4.  A deed or mortgage may have been made by an insane person or one otherwise incompetent.

5.  A deed or mortgage may have been made under a power of attorney after its termination and would, therefore be void.

6.  A deed or a mortgage may have been procured by fraud or duress.

7.  The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.

8.  A deed or mortgage may have been procured by fraud or duress.

9.  Title transferred by an heir may be subject to a federal estate tax lien.

10.  An heir or other person presumed dead may appear and recover the property or an interest therein.

11.  A judgment or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding.

12. Title insurance covers attorney's fees and court costs.

13.  Title insurance helps speed negotiations when you are ready to sell or obtain a loan.

14.  By insuring the title, you can eliminate delays and technicalities  when passing your title on   to someone else.

15.  Title insurance reimburses you for the amount of your covered losses.

16.  A deed of mortgage may be voidable because it was signed while the grantor was in bankruptcy.
 
17.  Each title insurance policy written is paid up in full, by the first premium for as long as you or your heirs own the property.

18.  There may be a defect in the recording of a document upon which your title is dependent.

19.  Claims constantly arise due to marital status and validity of divorces.  Only title insurance protects against claims made by non-existent or divorced "wives" or "husbands."

20.  Many lawyers, in giving an opinion on a title, protect their client as well as themselves by procuring title insurance.


                                               Seven Common Ways to Hold Title

Sole Ownership: 
1.  A single Man/Woman who is not legally married.  Example: John Doe, a single man.

2.  An unmarried Man/Woman, who having been married , is legally divorced.  Example: Jane Doe, an unmarried woman.

3.  A Married Man/Woman, as His/Her Sole and Separate Property.  When a married man or woman wishes to acquire title in his or her name alone, the spouse must consent, by quitclaim deed or otherwise, to the transfer thereby relinquishing all right, title and interest in the property.  Example: John Doe, a married man, and his sole and separate property.

Co-Ownership

Community Property:
4.  Real property conveyed to a married man or woman is presumed to to be community property, unless otherwise stated.  Under community property, both spouses have the right to dispose of one-half of the community property.  If a spouse does not exercise his/her right to dispose of one-half to someone other than his/her spouse, then the one-half will go to the surviving spouse without administration.  If a spouse exercises his/her right to dispose of one-half, that half is subject to administration in the estate.

Joint Tenancy:
5.  A joint tenancy estate is defined in the Civil Code as follows: "A joint interest in one owned by two or more persons in equal shares, by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy."  A characteristic of joint tenancy property is the right or survivorship.  When a joint tenant dies , title to the property immediately vest in the surviving joint tenant(s).  As a consequence, joint tenancy property is not subject to disposition by will.  Example:  John Doe and Jane Doe, husband and wife, as joint tenants.

Tenancy in Common:
6.  Under tenancy in common, the co-owners own undivided interest; but unlike joint tenancy, this interests need not be equal in quantity or duration, and may arise at different times.  There is no right of survivorship; each tenant owns an interest which, on his or her death, vest in his or hers heirs or divisees.  Example: Jane Doe, a single woman, as to un undivided interest 3/4ths interest, and Wanda Rowe, a single woman, as an undivided 1/4 interest, an tenants in common.

Trust:
7.  Title to real property may be held in a title holding trust.  The trust holds legal and equitable title to real estate.  The trustee holds title for the trustor/beneficiary who retains all of the management rights and responsibilities.

                                                                      Disclosure
The information above is provided for educational purposes only by Q'Connexion Real Estate Group, and is not to be used to determine how you should hold title.  Please seek professional counsel from an attorney/Certified Professional Accountant  to determine the legal and tax consequences on how title is vested in your state.