Title Insurance

SERIOUSLY, THIS IS WHY YOU GET TITLE INSURANCE

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In 1980 a man and a woman purchased property. They were married when they bought it, but did not put that on the deed. The husband died. He had six children from a previous marriage and the wife had one daughter from a previous marriage, and the daughter had Power of Attorney for her mom. The wife sold the property to a family friend, a contract for deed, but it was unrecorded. The arrangement was in writing, but without witnesses or notary. Then the wife died. You cannot make up stories like this– they can only happen in real life real estate!

To recap, the man and woman took title without putting their marital status on deed. The man died. The woman sold the home. In 2004, the family friend that bought the home paid it off, but was it conveyed properly? The woman passed away. What about the six children from the man- do they need to be notified?

We’re talking about a mobile home in a more challenged area and the family didn’t have the money to pay the doc stamps on the deed. It costs money to put things in public records. They did the best they could but they didn’t have the resources.

There are a lot of issues going on here- a lot of muddy water. Yeah, everything can be fixed- it’s going to take an attorney and some money, but it can be fixed- but are you willing to buy that property without some kind of financial protection?

With that many issues, there’s a lot of looming risk. If you’re going to buy the property, you take on that risk. It might be a great deal, but only if you don’t have to hire a lawyers yourself. Seriously, this is why you get title insurance- to cover the legal defense of your property ownership and to give you financial protection and assurance should there be a valid claim. Again, that is a true story.

Land Title of AmericaSERIOUSLY, THIS IS WHY YOU GET TITLE INSURANCE
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“IF ANY”- QUIT CLAIM DEEDS

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With a Warranty Deed, the grantor fully warrants the title to the said land, and will defend the same against lawful claims of all persons whomsoever. You don’t get that with a Quit Claim Deed.

When someone deeds interest in a property via Quit Claim, he conveys or gives all interest he has IF ANY

. What if he doesn’t have any interest in that property? A Quit Claim Deed provides no warranties. DON’T DO IT.

Furthermore, because Quit Claim Deeds carry no warranties, they void title insurance policies. Yeah, so not only do you have no warranty on the deed, you also have no insurance to protect you from financial loss should someone challenge your ownership of the property.

A Quit Claim Deed is a great way to “clean up” title, but it doesn’t guarantee anything. It can also be a conduit for fraud, and you really don’t want to be on that end of the stick.

With very few exceptions, always get a WARRANTY DEED instead of a Quit Claim Deed.

Land Title of America“IF ANY”- QUIT CLAIM DEEDS
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BEYOND COMMON CENTS

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Get in out of the rain. If you’re cold, put on a sweater. If your printer stops printing, check the paper. When your car unexpectedly stops, see if the fuel light is on. Some things in life are self-explanatory-others need further explanation.

The advantages of home ownership seem pretty straightforward. Unless you’re in the military service or you still live with your mom, you need a place to call your own, a place were you can pile up your dirty socks, raise your children, make spaghetti. However, the risks of home ownership are not quite as easy to see. A property title dispute may lie beyond common sense, and can be financially devastating.

A home gives you shelter and the stability of equity, which can help you get credit for other things like student loans for your kids or auto loans. A dispute of your home ownership title puts everything in jeopardy-from the roof over your head to the financial future of your children.

Even if the challenge to your ownership title is bogus, you still have to defend yourself in a court of law-that’s what makes a title challenge so expensive. It’s financial double jeopardy. For one, your house is at stake in the challenge. And for two, all your other assets are at stake-college funds, retirement pensions, checking account, savings account, and even that little investment your wife doesn’t know about yet- as you try to pay for legal costs in your defense.

Relax, there’s an easy fix: Title Insurance. For a one-time fee, Title Insurance covers the hidden risk of ownership title challenges. Easy, and a nominal cost compared to legal fees.* Title Insurance gives you financial protection for pennies on the dollar-now that’s common cents compared to the extravagant expense of court costs.

If you didn’t get Title Insurance at closing on your home and you don’t have a current claim files against your title, you can buy Title Insurance after the fact.

Title Insurance may not have intuitive worth at purchase, but it packs uncommon value if your ownership rights are challenged.

*Title Insurance fees are regulated by the State of Florida. The base rate is $5.75 per thousand up to $100,000, and $5.00 per thousand thereafter up to $1 million. For example, if you’re looking at a $100,000 home, then the Title Insurance cost is $575. For proper coverage, you need title endorsements. A title endorsement is an addition or modification of a title insurance policy which expands or changes coverage of the policy, fulfilling specific requirements of the insured. The average cost of an endorsement is $25 to $85 per endorsement. On a $100,000 home, you can get a whole lot of coverage for only a handful of hundreds.

Land Title of AmericaBEYOND COMMON CENTS
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FEET FIRST FIRST TIME

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That’s the rule for jumping into an unknown body of water. You wouldn’t want to dive headlong onto sharp rocks under shallow water. Minimize risk by putting your feet at peril instead of your skull. “Foot trauma” always reads better on a medical chart than “head injury”.

Buying real estate can be like jumping into unknown water. Even if you know the seller, even if you know the real estate has been in the seller’s family for generations, there can still be risks that you just can’t see.

A title search is a good way to minimize risk. A title search is a review of public records- deeds and documents from the courthouse that show the chain of ownership for a particular plot of land. A title search reveals obvious problems-logs sticking out above the water’s surface-which you want to deal with before you jump in.

However, a title search cannot “see” problems that are off the record. Errors and omissions, undisclosed heirs, and forgery are some of the jagged objects that can hide below the waterline. Your real estate ownership can snag on these, after the closing of the sale, after you’ve put time and money into the home or land.

While a title search helps minimize risk, title insurance minimizes the financial risk. What you don’t know could cost you a lot of money. However, title insurance protects your financial investment and protects it in two ways.

One, title insurance pays for the legal defense of your ownership rights. If someone tries to claim that your home was actually willed to them, your title insurance will pay for all the legal fees in the defense of your ownership.
Two, title insurance will pay the policy amount if the legal defense fails.

Whether it’s your first real estate purchase or if you’re a veteran landowner, always get a title search to look for obvious risk, and always get title insurance to protect you financially from hidden risk.

Remember: if you’re jumping into water where you’ve never been swimming before, go feet first the first time.

Land Title of AmericaFEET FIRST FIRST TIME
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FAMILY FAVORITISM & REAL ESTATE TITLE

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Would you have lunch with a felon? Yes? No? Under what conditions? What if he were family? What if he were your brother? Do you show family favoritism because you feel obligated, or is it that because he’s family, you’re more willing to give him a second chance? Families can get into tough situations, real estate transfers among them.

With any transaction with someone familiar to you- a friend or family member-there’s a tendency to drop the formalities, to do things quickly. Quickly is not necessarily correctly and may cause a lot of problems later up and down the family tree.

Nobody wants to have to answer that first question. And nobody wants to deal with a real estate title problem, especially one inherited from a family member. Sometimes those close to us cause the most difficulties. ALWAYS get title insurance, no matter where the property is coming from. Title insurance covers the mistakes of the past through all of your ownership or financial interest future in the property.

Land Title of AmericaFAMILY FAVORITISM & REAL ESTATE TITLE
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CLOSE ONLY COUNTS IN HORSESHOES- NOT LAND SURVEYS

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I lined up the shot- a three-pointer from the other side of my office, over my desk, aimed at the trashcan under the credenza. I angled my stance, checked the wind speed of the A/C draft, and released the paper wad from my hand…. It arced gracefully to clear my workstation and was on target to drop through the rim without touching. Then the air conditioning kicked on and knocked my perfect shot out of orbit. The paper wad quickly lost altitude and landed on the floor-I was so close! My staff did not applaud. Close only counts in horseshoes-not in basketball and certainly not in land survey.

A survey on a piece of real estate can’t be “close”. A survey defines the amount of land you pay for (or will be paid for) and is the basis of your living space-easements and set-backs.

Get a survey before you buy. Even if you are purchasing within a platted neighborhood where colorful flags “outline your lot”, get survey. It can mean the difference between where you put your jacuzzi and being in hot water.

The problem is, if you encroach on someone else’s property, not only do you decrease their lot, you also throw off the set-backs they’re required to have.

A swimming pool in the wrong place tends to water-down relations between neighbors. A poorly located drain field is even worse! When stuff like that hits the fan, amicable next door residents can become nasty neighbors in a hurry. No, “close” definitely doesn’t count in land surveys.

Get your survey when you purchase, and get title insurance to cover any in accuracy on the boundaries. There’s a lot at stake. Survey errors can happen, but if you have title insurance without a survey exception, you don’t have to pay to fix the mistake. Title insurance pays for the defense of your ownership and will pay for valid claims, such as an error on your survey. (The ALTA 9 endorsement will probably be a good idea also.)

Be close in horseshoes, be close with your neighbors, but when it comes to putting up a fence, know where your boundaries are and follow them.

Land Title of AmericaCLOSE ONLY COUNTS IN HORSESHOES- NOT LAND SURVEYS
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KARMA & TITLE INSURANCE

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Andy was a man who lived right. He was fair and honest in all his business dealings. He gave money to numerous charities, volunteered his time at schools and hospitals, and he was even known for saving prime parking spaces for old ladies at the grocery store on rainy days. One day a man moved in next door to Andy, a newcomer to the town, and accused Andy of having his septic tank eight feet over on his yard. Despite Andy’s many good deeds, he had the misfortune of this property dispute, and Andy was obligated to defend his land ownership rights.

Fortunately for Andy, where his karma had failed, he had title insurance without a survey exception to help him through his crisis. His title insurance policy provided legal representation and covered all court costs in the defense of his property rights. It was not an easy process, especially to be at odds with his neighbor, but at least he had financial support in a bad situation.

Furthermore, even while Andy was going through the property dispute, he could afford to continue donations to his favorite charities because his title insurance paid for his legal expenses.

Land Title of AmericaKARMA & TITLE INSURANCE
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BAD WORD: “QUIT CLAIM DEED”

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I said a bad word on the radio- “Quit Claim Deed”. Don’t say that in front of your mother or write it on the bathroom wall!

When you convey a property using a Quit Claim Deed, you give all interest you have in that property IF ANY– but you may not have any interest. There are no warranties.

Let’s say Henry bought a nice home from a family member and paid cash. Because the transaction was among family, everybody decided to save cost and do the transfer without an attorney or title company. They’d heard from their friend that because there was no closing involved, it was a fast transfer of interest, it was a QUICK claim deed. (Please pay attention to the spelling- it’s a quit claim deed, not a quick or fast deed.)

DON’T DO IT. By using a Quit Claim Deed, the title insurance policy on the property was voided. Quit claim deeds are great for cleaning up title related issues, but not much more.

(Quit claim deeds can also be an easy way for someone to commit fraud.)

With few exceptions, always gat a WARRANTY DEED instead of a quit claim deed.

Land Title of AmericaBAD WORD: “QUIT CLAIM DEED”
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Logical Conclusion: Owner’s Title Insurance

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This statement is untrue:  the title to your house is clean.

Now, if your home title is clean, then the statement is false, which means your home title has an issue.

…On the other hand, if your home title has an issue, then the statement is true (as being untrue), which means you do not have a title issue.

You could sit there and try to work that out…or you could just get Owner’s Title Insurance.

Owner’s Title Insurance offers financial protection to homeowners in any scenario.

Even if you get a title search, you cannot say conclusively that your property title is clean.  A title search can only see what’s in public records.  It doesn’t account for an old deed in somebody’s sock drawer, or a clerical error, or a previously unknown heir (they happen!!).

While a title search is a necessary precaution to deal with any known problems, Owner’s Title Insurance covers the hidden risk of possible title challenges.

Furthermore, title insurance is low cost, and it’s a premium you pay only once, which covers you for as long as you own the property…and forever after you convey it, covering your financial liability for your link in that chain of title.

Logical Conclusion:  Owner’s Title Insurance is the most cost effective way to financially protect yourself from title issues on your property from now through forever. 

 

Stephen CollinsLogical Conclusion: Owner’s Title Insurance
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Attorneys Who Write Title…The Conversation Continues

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We appreciate people reading our blog, and we’re glad to have received a comment on our recent post about attorneys who write title insurance in the same transaction (“Attorney Mistake in Writing Title” http://staugustine.com/interact/blog-post/stephen-collins/2015-05-20/attorney-mistake-writing-title#.VcNx4flViko ).   The reader brings up some interesting points, which we’d like to address.  Please see the reader’s comments and our responses below.

 

  1. Reader Comment: “…there is absolutely nothing wrong with an attorney representing a client in a real estate transaction in which they also write the title insurance policy.”
  1. Land Title Response: If you understand the role of the title insurance company, how can that not be a conflict?

 

  1. Reader Comment: “There is nothing in your example that has anything to do with the fact that the closing agent was an attorney.”
  1. Land Title Response: I agree to a point, we take no issue with an attorney title company; we take issue with an attorney as a title company and representing the client in the same transaction.

Had there been a separate attorney in the example, one attorney would help the other to complete the fiduciary responsibilities for the buyer.  Even good people in desperate times do desperate things.  An attorney representing the title underwriter and a separate attorney representing the buyer is the best way to represent the buyer’s interest.

 

  1. Reader Comment: “I could give many more examples of incompetent title companies that have created title defects because of their mistakes…”
  1. Land Title Response: Title insurance companies make mistakes, you are exactly correct. Incompetent title insurance companies and incompetent attorneys are the woe of property owners.  What better way to prevent that, than to have a separate attorney, one who represents only the buyer/seller’s interest?

 

  1. Reader Comment: [Continuation of previous comment:] “I could give many more examples of incompetent title companies…drafting documents outside of what is allowed by the Florida Supreme Court or by advising buyers or sellers about the closing documents.”
  1. Land Title Response: I agree that this is a problem; however, as I stated earlier, the best way to handle a real estate transaction is to have an attorney title company or a title insurance company writing the title insurance policy and a separate attorney represent the buyer.

Please note though, under issuance of the title insurance commitment, title insurance companies are allowed to issue legal documents to facilitate the transaction.

 

  1. Reader Comment: “…an attorney can legally explain the closing documents to their client, point out any problems with the survey, and also explain the impact of the title exceptions…”
  1. Land Title Response: You are correct; an attorney can explain all those things. An attorney who doesn’t write the title insurance for that particular transaction is the best person to do so because he can truly represent his client without conflict with his contractual obligation to his title underwriter.  How do you eliminate risk for the title insurance underwriter with whom you have a contractual obligation without increasing risk for your buyer?  On the other hand, how do you eliminate risk for your buyer without increasing risk for your title insurance underwriter?  To think that their interests are aligned is correct…unless there’s a title claim, and then their interests are at great odds.  Which side of the fence are you going to be on as the attorney who wrote the title insurance and issued the title policy for the same transaction?  When your buyer comes to you and says, “I need you to sue the title company?”  Will you be able to?  Will you be able to represent your buyer?  Or will you be able to tell them?  How much better would it be if your buyer came to you and asked you to represent them in a title insurance case in which you did not also write the title insurance?

 

  1. Reader Comment: “What you described as happening with that attorney in Pennsylvania has nothing to do with the fact that they were an attorney.”
  1. Land Title Response: I agree with you 100 percent.

 

  1. Reader Comment: “…how would closing with a non-attorney title company be any better since they would not represent the buyer’s or seller’s interest either?
  1. Land Title Response: It wouldn’t. We have no issue with an attorney title insurance company.  In some cases, if an attorney title insurance company specializes in real estate, they can be a great choice.  The only issue is when that attorney writing title insurance feels they can represent the buyer and the title insurance underwriter at the same time.  Conflict.  Conflict.  Conflict.  Anyone who does that is looking at the sun and denying it’s there.

 

To see the original post, “Attorney Mistake in Writing Title” along with the original reader comment, go to http://staugustine.com/interact/blog-post/stephen-collins/2015-05-20/attorney-mistake-writing-title#.VcNx4flViko .  Again, thank you to all our readers.  We appreciate your sincere consideration of these important aspects of property ownership, and encourage your dialogue in this ongoing conversation.

To speak with us directly, you may contact us during business hours (EST) by calling our office at (904) 797-9600 or Live Chat with us here on our website.

Stephen CollinsAttorneys Who Write Title…The Conversation Continues
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