Frequently Asked Questions About Title Insurance/Real Estate Closings
What is title insurance?
A title is the legal evidence, or right, that a person has to the ownership and possession of land and property. Title insurance is essential for homeowners because it’s possible that someone other than the seller has a legal right to the property you’re buying, or that there are errors in the property records. Some problems may remain undisclosed even after the most careful search of public records. These hidden “defects” threaten your right to the property you’re buying and sometimes aren’t discovered for months or even years after you purchase your home. You could be forced to spend substantial money on a legal defense to protect your rights and your property. Title insurance helps protect you against losses and defects and provides legal defense for coverage risks.
Why do I need title insurance?
Title insurance protects what is possibly the most important investment you’ll ever make: your real estate purchase. Sometimes, other people or creditors may have a valid and legal claim to the title of the property you’re buying. It doesn’t matter if you know about the problem; if someone else has a legally valid partial or full claim to your property, and if that claim is proven in a court of law, you’re going to have to pay the claim. A claim like this could mean that unless you have thousands of dollars in cash on hand, you may have to sell the property in order to raise the cash you need and settle the claim. Title insurance will pay that claim for you, should a problem arise that wasn’t resolved during the title search.
Doesn’t the lender’s policy protect the borrower?
Lenders get title insurance to protect their own interests. Because a property is pledged or promised as security for the loan, should the borrower be unable to pay back the loan, the lender wants to know that there are no other claims to the title and there won’t be any problems if they take over the property. The lender does this by obtaining a loan policy of title insurance.
The loan policy protects the lender against loss due to unknown title defects or problems (in other words, if other people have a legal claim to the title of your property). It also protects the lender’s interest from certain matters which may exist but aren’t known at the time of the sale. But this policy only protects the lender’s interest. It does not protect you, the borrower. That’s why a real estate purchaser needs an owner’s policy, which can be issued at the same time as the loan policy, usually for a nominal one-time fee.
How can there be a title defect if the title has been searched and a loan policy issued?
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.
What protection does title insurance provide against defects and hidden risks?
Title insurance will pay for defending against any lawsuit attacking the title as insured, and will either clear up title problems or pay the insured’s losses. For a one-time premium, an owner’s title insurance policy remains in effect as long as the insured, or the insured’s heirs, retain an interest in the property or have any obligations under a warranty in any conveyance of it. Owner’s title insurance, issued simultaneously with a loan policy, is the best title insurance value a property owner can get.
How much does title insurance cost?
The premium for title insurance is paid only one time, usually at closing. The single premium is directly related to and calculated based on the value of your home. Typically, it’s less expensive than your annual auto insurance. It’s a one-time-only expense, yet owner’s and enhanced owner’s title policies continue to provide complete coverage for as long as you or your heirs own the property. Visit our rate calculator or call us for a free, no-obligation quote for title insurance on your property.
What does an owner’s title insurance policy cover?
An owner’s policy of title insurance covers the owner of the property and maintains its face amount for as long as you or your heirs own the property. This policy covers you for the following title defects occurring prior to the policy date:
- An incorrect name on the title
- Any defect or lien on the title
- Lack of access to or from the property
- Unmarketability of the title. This means if years down the road, something comes up that means you or your heirs are unable to sell the property, your title insurance will cover their losses. A common example is if you leave your property to your heirs and they want to sell the property. However, one of the heirs is missing or refuses to sign over their part of the property. The property cannot be sold at that point and is considered “unmarketable.”
- You are forced to remove an existing structure, because it encroaches on your neighbor’s property
- You are denied financing on your property or the ability to sell your property, because a neighbor’s existing structure encroaches on your property
- You are forced to remove an existing structure, because it encroaches on an easement or over a building setback line
- Your existing structure(s) is damaged because of access, use, or maintenance of an easement on your land by an easement holder
What does an enhanced title insurance policy cover?
An enhanced title insurance policy provides the most complete title coverage available. It’s available for residential property only, and the property must be your primary residence. The enhanced policy automatically increases by 10% in value each year for the first five years, up to 150%. In addition to the coverage provided in the owner’s policy, the enhanced owner’s policy protects against 28 additional potential defects, some of which may occur after the policy date:
- Your title is lost or taken because of a violation of any covenant, condition, or restriction, which occurred before you acquired your title
- You are forced to correct or remove an existing violation of any covenant, condition, or restriction affecting the land
- You do not have vehicular and pedestrian access to and from the land based upon a legal right
- You are unable to obtain a building permit, you are required to correct or remove the violation, or you are unable to sell, lease, or mortgage your property because of an existing violation of a subdivision law or regulation affecting the land
- You are forced to remove or remedy your existing structures or any part of them, because they violate an existing zoning law or zoning regulation
- You cannot use the land, because use as a single-family residence violates an existing zoning law or zoning regulation
- Your existing improvements, including lawns, shrubbery or trees, are damaged because of future exercise of right to use the surface of the land for the extraction or development of minerals, water, or any other substance; you see, while you may have rights to what is on the surface of your land and property, you may not necessarily have rights to what is below the surface (think water, minerals, oil, etc.); if it is determined that a company has the right to drill below your land to get to something valuable, in most cases enhanced title insurance covers the damages such digging or drilling may cause
- Someone else tries to enforce a discriminatory covenant, condition, or restriction that they claim affects your title based upon race, color, religion, sex, handicap, familial status, or national origin
- A taxing authority assesses supplemental real estate taxes not previously assessed against the land for any period before the policy date because of construction, a change of ownership, or use that occurred before the policy date
- Your neighbor builds any structure after the policy date which encroaches on the land
- The residence with the address is not located on the land at the policy date
- The map, if any, that is attached to the policy does not show the correct location of the land according to the public records.
What could happen if I don’t have title insurance?
Here’s one example of the kind of loss you can suffer without title insurance.
Assume a piece of real estate was purchased for $100,000 with a down payment of $20,000. A lender holds an $80,000 mortgage lien, or beneficial interest. The lender acquires title insurance protecting the lender’s interest up to $80,000, but the purchaser’s down payment of $20,000 is not covered.
What if a question arises about the past ownership of the property and who has claim to the property title? The title insurance company would defend and protect the interest of the lender. However, without title insurance of their own, the purchaser would have to assume the financial burden of his or her own legal defense. If the defense is not successful, the result could be a total loss of title.
The title insurance company pays the lender’s loss and is entitled to take an assignment of the borrower’s debt. The purchaser loses the down payment, other equity in the property that may have accumulated, and the property. And the balance on the note is still due!
Real Estate Closings
Don’t I need a real estate attorney to close on my new home?
No. Under the law of the Commonwealth of Virginia (sections 55-525.18 and 55-525.19), a title company can process your real estate closing for you. There are many advantages to working with a title company. Because closings and title insurance are all we do, we tend to be more flexible and accommodating to your schedule. You can also get everything you need for your closing and your title insurance in one office. We can often work more efficiently and be more cost-effective, because we focus on closings and don’t have other tasks or jobs that could distract us. Safe Harbor also carries a larger Errors and Omissions insurance policy (eight times the amount required by the state) than the average closing company or real estate agent.
Does Safe Harbor Title Company only handle real estate closings in Virginia?
While many of our clients are based in Virginia, we’re able to handle commercial and residential closings nationwide. We’ve even arranged a notary closing for Hawaii-based clients who were buying property in Virginia.
Who does Safe Harbor Title Company work for at the closing?
The work we do is determined by which party hires us. If you’re the purchaser, we facilitate the execution of the terms of the transaction. In other words, we don’t negotiate the terms of the transaction; we simply make sure those terms are carried out properly according to the law. If you’re the seller, we work with one of our partners to have a deed drafted for you. We also coordinate with the purchasers to execute the terms of the transaction. In a refinance closing, we work for the borrower. We are there to follow your lender’s instructions, to explain the documents to you, and to verify that they are properly executed.
How far in advance should I contact Safe Harbor Title Company to handle my closing?
If purchasing, you should contact Safe Title Harbor Company as soon as you have a signed contract. By contacting us as early as possible, you allow us adequate time to obtain a title abstract on the property being purchased and clear any outstanding concerns on the title prior to your contracted settlement date. Additionally, we can better coordinate the closing with everyone involved, including the sellers, purchasers, real estate professionals, and lenders.
If refinancing, you should contact us after you submit your loan application. Do not wait for final loan approval, as the time between your loan approval and closing is often only a few days. By scheduling with us early, you allow us time to obtain the title abstract and clear any issues with your title, obtain payoffs from your current lender, and coordinate closing with your new lender.
What do I need to bring to closing?
First and foremost, you need to bring a smile. Our goal at Safe Harbor Title Company is to make sure you leave with a smile, too. You will also need to bring a valid government-issued picture ID, such as a driver’s license, passport, or military ID. Additionally, if you are bringing money to the closing, also sometimes called the settlement, these funds will need to be certified funds. Certified funds can come in the form of a cashier’s check, teller’s check, money order, or certified personal check. Cash is only acceptable in small amounts. Please call our office in advance if you intend to bring cash to closing. You may also be required to bring additional documents, which our office will describe in advance.
Who attends the closing or settlement?
At a purchase closing, typically the sellers, purchasers, and their real estate professionals will attend, which will be conducted by one of our competent and experienced settlement officers. At a refinance closing, usually only the borrowers and our attorney or settlement officer are present.
What if I can’t attend the closing in person?
In certain circumstances, a power of attorney (POA) can be prepared for you. A POA is a legal instrument that allows another person to sign legal documents on your behalf. Please give one of our settlement officers a call to see if this is an option that could work for you.
How long will the closing take?
While the time required for a closing can vary, typically a refinance will take between 30 and 50 minutes and a purchase will take 45 to 75 minutes.