Title insurance assures you that any potential problems with the legal ownership of the property you are buying, which can be uncovered through public records, have been brought to your attention. This allows you to correct any defects before completing the purchase.
Additionally, it is insurance that if any undiscovered claims covered by your policy arise 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.
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.
In order to determine the status of title, we conduct a diligent search of the public records for those documents associated with the property. Then we examine those recorded documents in order 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 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.
If a claim is made against your insured title, the title insurance provider 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.
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.
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 a search and examination of those public records.
Matters such 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, we provide insurance coverage for such claims. This is the second benefit you receive from title insurance.
- Deposits the executed deed to the buyer with the escrow holder.
- Deposits evidence of pest inspection and any required repair work.
- Deposits other required documents such as tax receipts, addresses of mortgage holders, insurance policies, equipment warranties or home warranty contracts, etc.
- Deposits the funds required, in addition to any borrowed funds, to pay the purchase price with the escrow holder.
- Deposits funds sufficient for home and title insurance.
- Arranges for any borrowed funds to be delivered to the escrow holder.
- Deposits any deed of trust or mortgages necessary to secure loans.
- Approves any inspection reports, the Preliminary Report for title insurance, etc., called for by the purchase and sale agreements.
- Fulfills any other conditions specified in the escrow instructions.
THE LENDER (IF APPLICABLE):
- Deposits proceeds of the loan to the purchaser.
- Directs the escrow holder on the conditions under which the loan funds may be used.
THE ESCROW HOLDER:
- Opens the order for the title insurance.
- Obtains approvals from the buyer on the Preliminary Report, pest and other inspections.
- Receives funds from the buyer and/or any lender.
- Prorates insurance, taxes, rents, etc.
- Disburses funds for title insurance, recording fees, real estate commissions, lien clearance, etc.
- Prepares a final statement for each party, indicating amounts to be disbursed for services and any further amounts necessary to close escrow.
- Records deed and loan documents, and then delivers the deed to the buyer, loan documents to the lender, and funds to the seller to close the escrow.
1. INITIAL REQUEST FOR TITLE INSURANCE
An order for title insurance is opened with a title officer, who produces the initial response within 24 to 48 hours. A preliminary report can be issued with the minimum of information, without even identifying the buyer or the terms of the sale. It shows the record title as it presently exists and is only an offer to provide insurance.
2. ON-SITE SEARCHING AND EXAMINING
Your title officer performs three searches: Property, Name, and Tax searches. From that information, a preliminary report is created. Our on-site customer service center expedites the process of obtaining hard copies of recorded documents. Imaging helps to expedite searches with the ability to obtain documents on-line.
3. TECHNICAL REVIEW
The skill and expertise of our title officer is the key to providing you with a useful, accurate title report. Once the report is issued the review begins by making a technical analysis of the documents of record. An interpretive view of all recorded matters is made to evaluate their impact on the title to the property. Among the questions the examiner asks are: Would any of the recorded matters prevent the buyer from using the property for its intended purpose? Can antiquated leases be eliminated from the policy per a review of the current leases?
4. INSPECTION ANALYSIS
In anticipation of ALTA coverage, a site inspection is ordered. From the inspection report, the initial title product is supplemented to show any encroachments or other off-record matters which would ultimately impact the title.
5. CO-INSURANCE, RE-INSURANCE, OTHER DETAILS
If co-insurance or re-insurance is needed for a transaction, we expedite the confirmation of approval. You, the customer, are never bogged down or delayed by the action on the part of our title unit. To the contrary, as a resource and as a facilitator of the transaction, we assume the responsibility for as many details as possible and are able to direct you to other resources where necessary (such as for a lost instrument bond).
6. WE EARN YOUR RESPECT WITH OUR SKILLS, SERVICE AND SOLUTIONS
We try not to point out impediments to the close of a transaction without also offering assistance and solutions. By understanding the sometimes delicate balance of the interests of the parties to a transaction, and by professionally and courteously handling issues as they arise, we can capably guide a transaction to a successful conclusion.
7. DOCUMENTS IN THE TITLE PROCESS:
- Preliminary Report - Represents a formal request for title insurance.
- Commitment – Lists the terms, conditions, and exclusions of title as it will be issued.
- Pro Forma – Specimen of what the requested policy, as requested, will look like. Underwriting issues are not yet completed and this document is not binding upon the company.
- Policy – The final contract of indemnity between named insureds and the company.
Here are just a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title:
- False impersonation of the true owner of the property
- Forged deed, releases or wills
- Instruments executed under invalid or expired power of attorney
- Undisclosed or missing heirs
- Mistakes in recording legal documents
- Misinterpretations of wills
- Deeds by persons of unsound mind
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Fraud Liens for unpaid estate, inheritance, income or gift taxes
An escrow is an arrangement in which a disinterested third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. People buying and selling real estate often open an escrow for their protection and convenience. The buyer can instruct the escrow holder to disburse the purchase price only upon the satisfaction of certain prerequisites and conditions. The seller can instruct the escrow holder to retain possession of the deed to the buyer until the seller’s requirements, including receipt of the purchase price, are met. Both rely on the escrow holder to carry out faithfully their mutually consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out. An escrow is convenient for the buyer and seller because both can move forward separately but simultaneously in providing inspections, reports, loan commitments and funds, deeds and many other items, using the escrow holder as the central depositing point. If the instructions from all parties to an escrow are clearly drafted, fully detailed and mutually consistent, the escrow holder can take many actions on their behalf without further consultation. This saves time and facilitates the closing of the transaction.
The escrow process was developed to help facilitate the sale or purchase of your home. The escrow holder accomplishes this by:
- Acting as the impartial “stakeholder,” or depository of documents and funds
- Processing and coordinating the flow of documents and funds
- Keeping all parties informed of progress on the escrow
- Responding to the lender’s requirements
- Securing a title insurance policy
- Obtaining approvals of reports and documents from the parties as required
- Prorating and adjusting insurance, taxes, rents, etc.
- Recording the deed and loan documents
- Maintaining security and accountability of monies owed and owing
It all begins with the offer and acceptance skillfully negotiated by the real estate agents representing Buyer and Seller.
Tenders a written offer to purchase (or accepts the Seller’s counter-offer) accompanied by a good faith deposit amount. Approves and signs the escrow instructions and other related instruments required to complete the transaction. Approves the preliminary report and any property, disclosure or inspection report called by the purchase and sale agreement. (Deposit Receipt) Approves and signs new loan documents and fulfills any remaining conditions contained in the contract, lender’s instructions and/or the escrow instructions. Deposits funds necessary to close the escrow. Approves any changes by signing amendments in the escrow instructions.
THE LENDER (WHEN APPLICABLE)
Accepts the new loan application and other related documents from the Buyer(s) and begins the qualification process. Orders and reviews the property appraisal, credit report, verification of employment, verification of deposit(s), preliminary report and other related information. Submits the entire package to the loan committee and/or underwriters for approval. When approved, loan conditions and title insurance requirements are established. Informs Buyer(s) of loan approval terms, commitment expiration date and provides a good faith estimate of the closing costs. Deposits the new loan documents and instructions with the escrow holder for Buyer’s approval and signature. Reviews and approves the executed loan package and coordinates the loan funding with the escrow officer.
THE ESCROW OFFICER
Receives an order for escrow and title services. Orders the preliminary report and examination on the subject property from FDLTitle as the impartial “stakeholder” or depository, in a fiduciary capacity, for all documents and monies required to complete the transaction per written instructions of the principals. Prepares the escrow instructions and required documents in accordance with terms of the sale. With the authorization from the real estate agent or principal, orders demands on existing deeds of trust and liens or judgments, if any. For assumption or subject to loan, orders the beneficiary’s statement or formal assumption package. Reviews documents received in the escrow: preliminary report, payoff or assumption statements, new loan package and other related instruments. Reviews the conditions in the lender’s instructions including the hazard and title insurance requirements. Presents the documents, statements, loan package(s), estimated closing statements and other related documents to the principal(s) for approval and signature, and requests the balance of the buyer’s funds. Reviews the proceeds of the loan(s) from the lender(s). Determines when the transaction will be in the position to close and advises the parties. Assisted by title personnel, records the deed, deed of trust and other documents required to complete the transaction with the County Recorder and orders the title insurance policies. Closes the escrow by preparing the final settlement statements, disbursing the proceeds to the Seller, paying off the existing encumbrances and other obligations. Delivers the appropriate statements, funds and remaining documents to the principals, agents and/or lenders.
Accepts Buyer’s Offer to Purchase and initial good faith deposit to open escrow. Submits documents and information to escrow holder, such as: addresses of lien holders, tax receipts, equipment warranties, home warranty contracts, any leases and/or rental agreements. Approves and signs the escrow instructions, grant deed and other related documents required to complete the transaction. Orders inspections, receives clearances and approves final reports and/or repairs to the property as required by the terms of the purchase and sale agreement (Deposit Receipt). Fulfills any remaining conditions specified in the contract and/or escrow instructions; approves the pay off demands and/or beneficiary’s statements. Approves any final changes by signing amendments to the escrow instructions or contract.
The title company will need the following information in order to research court records on behalf of the lender:
- FULL LEGAL NAMES, including how you want your name to read on title.
We will also need the spouse's maiden name, if any, as well as previously married names.
- MARITAL STATUS: Are you currently married? Divorced? Widowed?
IN THE STATE OF LOUISIANA, ALL NAMES ARE RUN IN THE COURTHOUSE BECAUSE JUDGMENTS FOLLOW THE INDIVIDUAL
- SOCIAL SECURITY NUMBERS: This information is necessary in order to confirm any possible judgments or liens if found in the courthouse and is required by the lender as well.
- HOMEOWNERS INSURANCE: It will be necessary for you to arrange for your Homeowners insurance to be in place prior to the closing, The homeowners insurance information WILL delay your closing package from the lender. Without it, the lender cannot generate a closing package. It is extremely important for you to decide on the homeowners’ insurer well prior to the closing.
- TERMITE CERTIFICATE: If the termite certificate is requested by you and you would like for this to be part of the closing, please let us know ahead of time.
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 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 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 any 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., event prior to the acquisition of the property). These risks are far less obvious than those protected against by automobile insurance, but can be just as devastating.
Title insurance will pay for defending against any lawsuit attacking your 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 you, or your heirs, retain an interest in the property.
What this means to you: The peace of mind in knowing that the investment you’ve made in your home is a safe one.
To protect possibly the most important investment you’ll ever make – the investment in your home. With a title insurance policy, you as the property owner have an indemnity contract that will reimburse you for loss in the event someone asserts a claim against your property that is covered by the policy.
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 first be informed of any existing rights or claims that may, in the future, threaten your title and possession to the property. Title insurance provides you with this twofold protection.