What is title insurance?

Title insurance assures the lender and buyer that the person selling a property has a clear title to transfer to the purchaser. Title companies, like Hillsboro, make sure that the title of a piece of real estate is legitimate and then issues title insurance for that property. This insurance protects lenders or owners against claims or legal fees that may arise over disputes regarding the ownership of the property.

What is a title?

A title is a legal right that a person has to the ownership and possession of land. 

How is title insurance different from other types of insurance?

When you purchase car insurance, you are buying protection against a future event. When you buy title insurance, you are insuring against losses caused by title problems that have occurred in the past; your title company seeks to eliminate the sources of these losses.

Are there different types of title insurance?

Yes, there are two types of title insurance: title insurance for lenders and title insurance for owners.

  • Lender policy: Lenders require you to purchase a lender’s policy. This kind of policy ensures that the financial institution has a valid, enforceable lien on the property for the loan amount. It protects the lending institution against losses occurring from defects in titles.
  • Owner policy: An owner’s title insurance policy protects the owner from title defects that existed before the issue date of your policy and covers the purchase price of the home. In some cases, it also covers the full cost of any legal defense of your title, for any covered matter.

What is a title search?

A title search is a full search of public records for a period of not less than 45 years. The search is done to ensure the person or company claiming to own the property does and to investigate the possibility of any outstanding mortgages, liens, judgments or unpaid taxes associated with the property, as well as any restrictions, easements, or other issues that could impact title transfer. A title search may also require a survey of the property in question to determine land boundaries or encroachments. Through an examination of title, the title company will determine if the title is valid and issues a title insurance policy which protects the appropriate parties.

What are escrow services?

Because real estate transactions between a buyer and a seller involve significant funds, an independent third party is often involved to oversee the process and ensure that both parties honor their commitments. Escrow services can include key settlement tasks, including depositing and disbursing funds and coordinating documentation, as well as ensuring taxes and insurance on the property are paid. 

Who is responsible for selecting the title company used in a real estate transaction?

The Real Estate Settlement Procedures Act (RESPA) entitles individual homeowners to choose a title insurance company when purchasing or refinancing a residential property. In many cases, realtors or attorneys will have a relationship with a particular title company established and can be good sources of referrals. However, it is illegal for these professionals to mandate that a particular title company be used in a real estate transaction.

How much does a title company charge?

It is a one-time premium directly related to the value of the property purchased. This one-time premium is paid once when you close on your property and continues to provide complete coverage for as long as you or your heirs own the property.

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Disclaimer: This is for informational purposes only. You should contact a licensed attorney with any questions regarding a particular legal matter.