Title Insurance and the Escrow Process

Title insurance is purchased with a one time fee paid at closing. Typically there is an owner's policy and a lender's policy if you financed the purchase. Title insurance protects you and the lender in the event there are claims made against the title to your home. We recommend you always obtain owner's coverage to protect your ownership rights in the property.

Title Search and Examination

Part of the process performed by the title company leading up to the closing includes a search of all public records that may have a bearing on the title to the real estate your are purchasing. Once the search gathers all the relevant information, an examination is conducted by the title agent or attorney on behalf of its underwriter to determine whether the property is insurable. The examination of evidence from a search is intended to fully report all material objections to the title. Frequently, documents that don’t clearly transfer title are found in the chain, or history that is assembled from the records in a search. Here are some examples of documents that can present concerns:

• Deeds, wills and trusts that contain improper wording or incorrect names
• Outstanding mortgages and judgments, or a lien against the property because the seller has not paid taxes
• Easements that allow construction of a road or utility line
• Pending legal action against the property that could affect a purchaser
• Incorrect notary acknowledgments

Through the search and examination, title problems are disclosed so they can be corrected whenever possible. However, even the most careful, preventative work cannot locate all hidden title hazards.

Hidden Title Hazards

In spite of all the expertise and dedication that go into a title search and examination, hidden hazards can emerge after closing, resulting in unpleasant and costly surprises. Some examples of hazards include:

•  A forged signature on the deed, which could mean no transfer of ownership to you
• An unknown heir of a previous owner who is claiming ownership of the property
• Instruments executed under an expired or a fabricated power of attorney
• Mistakes in the public records

Title insurance offers financial protection against these and other covered title hazards. The title insurer will pay for defending against an attack on title as insured, and will either perfect the title or pay valid claims.

Escrow

The escrow process involves the exchange of documents and funds in connection with the closing on your home. Typically, you will have paid an earnest money deposit when you signed the contract. These funds, along with any funds you are bringing to closing and funds received from your lender, will be held in escrow and only given to the seller after the seller has executed any documents necessary to convey title to the property to you and complete the closing. You will also have to sign documents required by your lender in order to release the funds and perfect their security interest in the property.