Real Estate has traditionally been an owner’s most valuable asset. It is a form of wealth protected by many laws. 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 may be others who have rights or claims in and to the property that you are buying. Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the IRS, 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 any knowledge of these rights or claims. In either event, these rights or claims remain attached to the property that you are buying until they are extinguished.
It is of utmost importance that you receive clear title to the property when you purchase real estate. In order to do so, you must be informed of any existing rights or claims that may be asserted by any party against the title to the property. In addition, you will want to be protected against any past undiscovered claims that may, in the future, threaten your title and possession to the property. Title Insurance provides you with this two-fold protection.
In order to determine if any claims exist a title company will conduct a diligent search of the public records for those documents associated with the property. The records are then examined to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded 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 types of defects will be reported to you prior to the 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.
Title insurance can also help protect against “hidden risks”. “Hidden Risks” are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of those public records. Matters such as forgery, incompetence 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.