After purchasing a new home, you will likely have multiple questions about how to protect your big investment. One of the most common ways to shield your property from adverse events is by purchasing a homeowners’ insurance policy. This can help pay for damages to your home’s foundation, the cost of replacing lost belongings or liability costs if someone is injured on your property. Another important form of protection for a home is title insurance. Here is a close look at what this is.
What Is Title Insurance?
Title insurance is a type of indemnity insurance that shields both homeowners and lenders from losses resulting from defects in a property’s title. Home titles can often be defective due to issues such as liens, encumbrances, and public record errors. There are two types of policies for title insurance: an owner’s policy and a lender’s policy. Typically, a title insurance seller pays for the new homeowner’s policy, while the homebuyer pays for the lender’s policy. However, this sometimes varies depending on the state, so be sure to look up this information.
Title Insurance Terms To Know
If you are not familiar with title insurance, this subject may appear overwhelming. Here are six key terms to know about this type of protection that will help you understand it better.
A title is considered “clear” if it has no defects that may potentially make the purchase or sale of the property problematic. It also signifies that there are no issues with the title in the foreseeable future. If you are unsure about what constitutes a “defective title,” you can ask an experienced title agent.
With regards to title insurance, “cloud” is a synonym for “defect.” Common examples of title clouds include liens for unpaid property taxes, mechanics liens for unpaid services provided by remodeling contractors, or other outstanding claims on the property. Clouds are generally discovered during a title search.
When you buy a new house and sign a purchase agreement, one of the requirements involves putting down earnest money. This serves as a way of demonstrating you are seriously interested in the property. You may only avoid paying earnest money if you have a valid reason for backing out of a home purchase (e.g. you are unable to acquire financing for the property). A title company can typically keep your earnest money in escrow until you close on a property.
A title search represents one of the primary responsibilities of a title company. A real estate professional will typically conduct a title search after you have agreed to buy a property. During this process, your title company will collect all the information about the home’s title from public records. Then, you and the property’s seller will be provided with a report on the title search that indicates whether any defects were discovered on the title.
Adverse possession occurs when an individual who does not legally own a property claims to own it and is granted ownership. This often happens because there exists a specific time interval for the homeowner (who is facing an ownership claim from someone else) to respond. If the homeowner or landowner does nothing, the property ownership becomes forfeited. Most courts will only consider an ownership claim to constitute “adverse possession” if the trespasser’s occupation of the property is hostile, actual, open and notorious, and exclusive and continuous for a given time period.
A deed is a document that serves as proof that you legally own a property. This is generally utilized to transfer a property’s title. You must ensure that your deed is recorded in a court and is completely binding.
Work With The Experts Of Title Insurance Terms
Speak to the professionals at Mathis Title Company in Virginia for more information on common title insurance terms. We are dedicated to providing title insurance and other real estate settlement services to individuals throughout Fairfax County.
During the sale and purchase of a home, we will hold the funds being transferred in escrow prior to closing. Once the title order has been approved, we can begin a title search to ensure a clean title transfer. Mathis can then issue a preliminary report for you to evaluate and approve. If you have any legal issues with the purchase of your property, Robin Mathis – an attorney with more than 30 years of experience in real estate settlement services – can assist you.
Call Mathis Title Company today at (703) 214-4020 or contact us online to learn more about title insurance.