Real Estate Investing Checking
Title And Title Insurance
By Matt Gerchow
The author has permitted the reprinting and redistribution of this
article.
Checking Title and Title Insurance
A clear title is what gives you the right to purchase, own and possess
the property. It’s hard to watch the news on a regular basis
and not see something related to title fraud.
After you secure your contract, you fax or email a copy over to your
title agent. They can usually pull a very quick search known as
‘an abstract', to let you know if there are immediate issues
you need to deal with.
A title search is a detailed examination of the historical records
concerning a property. These include deeds, court records, property
name indexes and any other filed documents.
The purpose of the search is to determine that the ownership of the
property is clear of liens, additional mortgages and other claims
against it.
A title search can uncover title defects and liens, as well as unpaid
taxes, unsatisfied mortgages, judgments against the seller, and
restrictions limiting the use of the land.
Title insurance protects you against any possible hidden hazards which
were not uncovered during a title search, such as the previous owner
incorrectly stating his marital status resulting in a claim by his
legal spouse. Then there is fraud, forgery, defective deeds, mental
incompetence, confusion due to similar or identical names and clerical
errors. Unlike other forms of insurance that focus on possible future
events and charge an annual premium, title insurance is purchased for a
one-time payment.
There are two types of title insurance policies. One is a loan policy
and the other is an owner’s policy. The loan policy is to
protect the lender’s outstanding balance on the
buyer’s mortgage. The owner’s policy protects the
buyer against other people’s claims of equity in the property.
Although, title charges are different for each area of the country,
title insurance costs usually run about one percent of the cost of the
property.
Unlike other insurance premiums, which are paid annually, a title
insurance premium is paid one time only, usually at settlement and
lasts for as long as you or your heirs own the property.
If a claim is filed against your property and you don’t have
title insurance, you stand the possibility in an extreme case of losing
the property and still being liable to pay the mortgage.
On one occasion during a double closing, I elected to make an extra
$1,500 on my assignment fee and not purchase Title Insurance on the
first closing. Turns out the tenant in the property had an Agreement
for Deed from 1974 which had been negated in 1975, but never had been
foreclosed off. The loss ended up costing me $20,000 for a settlement
and $5,000 in attorney fees. OUCH! Make sure you take title insurance
on your double closings! Let me say that again, Make sure you take
title insurance on your double closings!
Hope this helps,
Matt Gerchow
If
you would like to take advantage of the market and learn how to invest
in real estate and you are local to the Dallas Fort Worth area, I know
a really great teacher and mentor here in Arlington Texas. Please take
a look at his web site: DennisJHenson.com,
Dennis has a great Mentoring and training program, I know because I am
one of his former students. I learned a lot from his one on one
teaching technique. - Michael Harman 817-457-7572
mchfun.business@gmail.com
http://www.biggerpockets.com/articles/