Why Do You Need Title Insurance?

When you’ve got ever purchased a house via a realtor and with a mortgage, then you could have seen a title commitment. This is a “invoice of health” from a title insurance company, alerting you to who owns the property you might be purchasing and to any liens, mortgages, or encumbrances on the property. It is essential that you just get a title commitment and title insurance.

A typical sales agreement requires the seller to provide the buyer a “warranty” deed. The word “warranty” implies that the seller is guaranteeing to the buyer that he/she owns the property, that it consists of the legal description set forth in the title commitment, and that the liens, encumbrances, and mortgages will have been discharged at the time of closing in order that the property is switchred without any baggage. As an aside, if the sales agreement was signed by one person but the title commitment indicates that there are owners of the property, each of the owners should sign the closing documents for the sale to be consummated. If the property is owned by an estate (because the owner died), the personal representative could must get a court order to obtain the writerity to sign a deed on behalf of the estate. If the property is owned by an organization, then a significantity of the shareholders should consent to the sale by a corporate resolution for the sale to be effective.

When there is no title insurance guaranteeing the authorized description, the legal owner, and the absence of encumbrances on the time of closing, the buyer normally gets a mere “quit claim” deed. This means “purchaser beware”-in spades. The buyer might later have a declare for fraud towards the seller, but that means a lawsuit and potential problems with amassing on a judgment. If, on the other hand, you could have title insurance and discover that the authorized description was mistaken, the seller didn’t have the appropriate to sell the property, and/or liens or different encumbrances were not disclosed or not discharged, you’ll be able to file an insurance declare and hopefully be paid almost immediately.

If you purchase property, particularly if it has been foreclosed or you’re shopping for it as a “quick sale,” make sure you get a title insurance commitment. The commitment provides direction for what must be executed to remove liens, encumbrances, and mortgages from the general public record. The commitment, nevertheless, can “expire.” There’s a date, often at the top, that indicates the final date that title to the property was checked. You may request that the title commitment be “up to date” to the date of the sale. If it isn’t and you settle for a commitment with a stale date, then you definately will not be able to complain if the IRS filed a lien against the property the day earlier than the sale, and the title firm did not discover it. Because title insurance companies are related these days to the Register of Deeds office, it just isn’t burdensome for them to do a last minute check.

As a last issue, when property has been foreclosed, there is a “redemption period” (generally six months) after the sheriff’s sale throughout which the owner can “redeem” the property. To redeem, the owner must go to the Register of Deeds office with a cashier’s check for the quantity paid on the sheriff’s sale plus the curiosity that has accrued because the sale. If the owner manages to sell the property throughout this redemption period, that may produce sufficient money to redeem the property. The problem is that if the property is redeemed, then the entire mortgages or liens that have been recorded after the foreclosed mortgage was recorded are reinstated and remain hooked up to the property.

For example, assume the next:

On January 5, 2008, Bank of America recorded a $100K mortgage loan to the owner.

On September 9, 2009, Quicken Loans recorded a $50K secured equity line.

On March 2, 2010, the IRS filed a lien for $a hundredK.

If (a) Bank of America foreclosed on the $100K mortgage loan; (b) Bank of America “bid” $100K at the sheriff’s sale (after which offered to cancel the mortgage in exchange for the property); and (c) the owner did not redeem the property-then the next Quicken Loans’ loan and the IRS lien shall be extinguished. Bank of America will own the property outright.

If, however, a) Bank of America foreclosed on the $100K mortgage loan; (b) Bank of America “bid” $one hundredK at the sheriff’s sale (and then offered to cancel the mortgage in change for the property); and (c) the owner did redeem the property -then the next Quicken Loans’ loan and the IRS lien stay an encumbrance towards the property. If somebody bought the property through the redemption period, even in a short sale, that person would have paid something to the owner to buy the property but would have really purchased property still topic to the $50K secured equity line and the $one hundredK IRS lien. Only the whole running of the redemption interval extinguishes subsequent liens, mortgages, and encumbrances unless these subsequent lenders or lien holders conform to launch their curiosity within the property. If you are still dealing with the owner of foreclosed property, the property is undoubtedly still in the redemption interval-and subsequently you MUST BEWARE!!

It is imperative that purchasers of real estate acquire title insurance and the knowledge of an excellent title insurance company. As they are saying, “If it’s too good to be true, then it probably will not be true.” While in most real estate deals the seller pays for the title insurance, there’s nothing to prevent a buyer from acquiring title insurance himself. On the minimum, a buyer ought to get hold of a title search of the property (present to the date of sale) earlier than any purchase.

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