Title by zhangyun

VIEWS: 5 PAGES: 126

									   Title Insurance for
Real Estate Professionals


                     1
  THE BASICS OF TITLE
      INSURANCE

“What Does a Title Insurance
      Company Do?”
                       2
Title insurance companies
    "insure”
         “title” to
               “real property”
                                 3
“Insure”

 To indemnify by providing
 monetary reimbursement
        for losses.
                        4
“Title”

The rights of ownership
     in real property.


                          5
Real property consists of
various components.


                        6
     Real Property Components
1.    SURFACE



                      earth


                              7
        Real Property


2. SUBSURFACE

                    earth


                            8
         Real Property




3. AIR SPACE         earth



                             9
       Real Property




                   earth
4. RIGHTS
                           10
           Real Property
     Includes “Improvements.”

Attachments to
real estate
intended to be
PERMANENT.

Examples: houses,
fences, driveways,
trees, and bushes…
                          11
    Real Property Includes
          “Fixtures.”
Attachments to
improvements that
become part of the
real estate.

Examples:
heating,
plumbing, and
electrical fixtures.    12
    Exceptions to Fixture Rule

   Trade fixtures used in a business or
    trade (usually when leasing).

   Emblements, or farm crops,
    can be sold separately from the land.


                                    13
                Chattels
Personal property, i.e.,
EVERYTHING that is
NOT real estate.

Examples:
 furniture,

 vehicles,

 stocks, and

 bonds.
                           14
        Chattels
Include:
 cash,

 contracts,

  and
 purchase

  agreements.
                   15
   Modular Housing—
Real or Personal Property?




Is it attached as an improvement
  and taxed as real property?
                            16
RIGHTS, TITLE, AND INTERESTS

        Certain rights
     always belong to the
        government.

                            17
Government Rights
  1. Police Powers


                     18
Government Rights

1. Police Powers

2. Eminent Domain


                    19
Government Rights

1. Police Powers

2. Eminent Domain

3. Taxation
                    20
Government Rights

1. Police Powers
2. Eminent Domain
3. Taxation
4. Escheat
                    21
  HIERARCHY OF
GOVERNMENT RIGHTS



                22
 Federal government
has highest priority, then
  state is followed by
   county and then
       municipal.

                         23
PRIVATE RIGHTS IN LAND

These are often discussed in
terms of a “bundle of rights.”



                           24
Title insurance can insure
almost any estate in real
property:

• fee title,
• a mortgage,
• a land contract,
• an easement...             25
  Three Areas
Title Companies
     Examine
to Reduce Risk


                  26
CONSTRUCTIVE NOTICE

 The rights shown by the
      public record.


                       27
       ACTUAL NOTICE
This occurs when something can
 be observed, heard, or sensed.



                          28
     RIGHTS AS
CONSEQUENCE OF LAW

    Unrecorded documents,
   grantors under legal age,
fraud, forgery, duress, insanity,
incompetency, unknown heirs,
    undisclosed marriages,
         identity theft...   29
THE BUSINESS
     OF
    TITLE
 INSURANCE     30
Title Assurance vs. Title Insurance

   Title assurance is a broad term
    including surveys, maps, title opinions,
    and anything having to do with title.

   Title insurance is a specific
    contractual obligation.


                                     31
        Alternative Products to
            Title Insurance

   Casualty insurance products

   Borrowers credit score

   “Owner and encumbrance” reports

                                  32
 Title Insurance
Protects Everyone

Lenders, buyers, and
 real estate agents


                  33
              Lenders

   Title policies indemnify lenders
    against loss.

   Use standardized forms
    and homogenize state laws.

   Help home ownership by making
    sale of mortgages easy.
                                   34
The Secondary Market

This ensures a constant
    source of money
      for housing.

   Financiers require
    title insurance to
protect their investment.
                        35
     Title Insurance
Protects Homeowners and
    Their Investment




                   36
   Title Insurance and the
      Real Estate Agent


         BEWARE!

  Never tell your buyer they don’t
need an owners policy. You may be
 at risk if there is a problem later!
                                37
 Title Companies may “insure over”
or provide “affirmative coverage” for
        problems for lenders.

   Insurance over a title problem
  is often available to the owner.


           Ask for it!
                               38
      Recognize a
“Notice of Title Defect.”

   It is information
important to the buyer.
          !!!
                      39
Owner Policy Is Different
  From Lender Policy

Owner’s policies are for
the full sale price
of the property.

                           40
 Owner Policy Is Different
   From Lender Policy


Lender’s policies only cover
the loan amount,
not buyer’s equity.
                         41
Owner Policy Is Different
  From Lender Policy

Owner’s coverage can last
 forever, as in corporate
  ownership or a trust.

                      42
Owner Policy Is Different
  From Lender Policy

 Mortgage policies decrease
   in value as the loan is
paid down and expire when
    the loan is paid off.
                       43
  A title company is either
           a title insurer
  (a.k.a. title underwriter)

                    or a title agent.




Title Underwriter           Title Agent
                                44
 Title insurers take liability
      under the policy.

Title agents write policies of
        title insurers.
                          45
     Closing Liability
           vs.
Title Insurance Liability


                     46
Title policies indemnify only
            title issues


                        47
Protect the Lender & Buyer

 Closing protection letters
    from the underwriter
  indemnify closing errors
      and theft of funds
       by a title agent.
                        48
MYTHS AND TRUTHS


              49
TOP SIX MYTHS ABOUT
  TITLE INSURANCE



                 50
         MYTH

   Title insurance is a
“guarantee” of good title.

                        51
          TRUTH

  Title insurance cannot
  “guarantee” good title.

Fraud, forgery, misrecorded
 or unrecorded documents,
   and undisclosed heirs
 all cause loss of property.52
            MYTH

     When a lender’s policy
is issued, title must be “good.”


                            53
        TRUTH
Even though a lender’s policy
exists, title may not be good.

    Title companies take
       calculated risks.
                           54
           MYTH

Title insurance is like other
     forms of insurance.

                           55
          TRUTH

     Title insurance is not
like other types of Insurance

  Title insurance covers
 past risks, not future risks
    like fire insurance.
                            56
 Title insurance is not like
 other forms of insurance.

What the consumer does to
 their own title after they
    purchase property
      is not covered.
                           57
Title insurance is not like other
       forms of insurance.

 The title industry is one of risk
elimination not risk assumption.

                              58
Title insurance is not like other
       forms of insurance.

        Investigating title
      in order to insure it
          is expensive.
                              59
Title insurance is not like other
       forms of insurance.

  Title issues today are riskier
than those in the past because
     of fraud, forgeries, etc.

                             60
         MYTH

Very few files have title
       problems.


                            61
      TRUTH

 One in four files
have title problems!


                       62
          MYTH

Title companies rarely pay.



                         63
           TRUTH

Title claims are skyrocketing!

In 2003 title industry paid out
   $661.7 million in claims

                            64
   Title companies pay.

          Remember:
    Title insurance covers
fraud, forgery, incompetence,
  duress, errors in records,
         survey issues,
   identity theft, and more.
                          65
 Real estate is a detailed and
   complex business with
many places to make mistakes.


                          66
  Title policies provide a
contractual duty to defend
    any covered claim,
        valid or not.

Defending a claim is costly.
                          67
HOW TO READ TITLE WORK
  LIKE A PROFESSIONAL



                   68
 A title commitment is the
document that shows all title
research done on a property
  through a particular date.

    It is used to prepare
    closing documents.
                            69
Understanding the Layout
  of a Title Commitment



                     70
   Cover sheet or jacket

Standard language pertaining
    to terms of the policy



                           71
       Schedule A

  Identifies the property,
       the insured,
     policy amounts,
how seller holds title, and a
 precise legal description.
                            72
    Schedule B

The “meat” of the title
 and key to closing.

Where to concentrate
   your efforts.
                          73
  Title Exceptions
      Found on
Nearly All Properties

                    74
  Real estate taxes are a
    government right.

They are handled at closing
per the purchase agreement.


                            75
     Assessments,
    a charge for the
improvement of property.

Handled at closing per the
  purchase agreement.

                        76
    Easements are
authorized uses of land
for a specific purpose.




                      77
    Types of Easements

Utility and drainage easements
        are most common.

 Consumer should be aware
  of their location and size.
                           78
  Types of Easements

Blanket easements cover a
     large tract of land
 without being specifically
          located.

                         79
   Types of Easements

Common driveway easements
  occur when two adjacent
   parcels share access.

                        80
  Types of Easements

Wetlands or environmental
   easements require
     the owner NOT
        to change
       the habitat.
                       81
Mortgages/deeds of trust
  pledge the property
     as security for
         a loan.


                       82
Covenants, Conditions, and
  Restrictions (CC&Rs)

     These can be “deed
 restrictions” i.e., restrictions
contained within a single deed
   to limit use of property.

                             83
Covenants, Conditions, and
  Restrictions (CC&Rs)

 These most often cover an
    entire subdivision.

                        84
Common interest communities
  occur when owners share
       such things as
     access, party walls,
    parking, and utilities.



 CC&Rs cover these issues.
                        85
Covenants, Conditions and
      Restrictions

 Be sure the buyer reads
 these before the closing!


                         86
UNDERSTANDING
 AND REMOVING
  TITLE ISSUES

             87
Understand the language so you
   can resolve the problem.

Encumbrances—any claim on title.

Liens—a type of encumbrance that
   can be removed with money.
                          88
    Liens are classified as

specific liens or general liens


                              89
Examples of Specific Liens
Specific liens attach to specific real
               estate.




    Mortgages $   Mechanics Liens
                                90

       Real Estate $ Taxes $
Examples of General Liens
 General liens attach to people..




 State Tax Liens             Judgments
     Child Support   Federal Tax Liens
                                    91
 ...and everything the people own
        including real estate.




General Liens
ex: STL, FTL, JU            92
An attorney’s lien is
  filed for services
     rendered by
     an attorney.




                        93
Financing Statement

A lien filed on personal
        property.



                      94
     Mechanic’s liens
     come about when
material or labor are supplied
   to build, renovate, or
       repair property.

                          95
  Judgment Liens

These are obtained by
    court order.



                        96
   State tax liens
are government liens
 for non-payment of
     state taxes.



                       97
Federal Tax Liens




                    98
    Child Support Liens

 These are general liens for
non payment of child support.


                          99
Federal district court judgments
     tend to be large national
   lawsuits with large awards.
                          100
 RED FLAG
  AREAS
FOR CLOSING

         101
       Bankruptcy
A way to temporarily suspend
     and possibly prevent
debt collection for those debts
   listed at the time of the
     bankruptcy petition.
                           102
     Cloud on Title


This is a generic name for
   any item that might
make title unmarketable.

                       103
   Homestead Exemption
         Issues

This is a law that protects a portion
     of the value of an owner’s
         principle residence
     from unsecured creditors.
                                104
      Eminent Domain

The government’s taking of land
    for the public good and
    with just compensation.


                          105
 Abstracts of Judgment

This is a lien in favor of the
  U.S. government or any
        U.S. agency
 that is good for 20 years.

                            106
    Pollution Control Liens

     These are liens by any
government agency for land clean-
              up.




                              107
  Decrees of Dissolution
       (Divorces)

These can create title issues.

          Watch for:
transfer of title to one party,
  liens, name changes, or
     special stipulations.  108
   Notices of Lis Pendens

This is a legal document stating
    that a law suit has been
 commenced on the property.


                            109
UNDERSTANDING
 TITLE POLICIES


                  110
    Title companies
   deal with problems
       differently.




You can shop a title company
 for the coverage you want.
                        111
Marketable Title
      vs.
 Insurable Title
      vs.
Salable Property

                   112
    Two Primary
  Types of Policies

Lender’s and Owner’s


                       113
All title policies
have the same
 five sections



                     114
         Section One
 Standard insuring provisions

   1. Title to the estate is as
     described in Schedule A.
2. There are no defects liens or
   encumbrances on title except
             as shown.
                          115
3. A legal right of access to
   and from the land exists.

  4.   Title is marketable.



                          116
On all policies, the
 title insurer has a
   duty to defend,
   whether or not
the claim is bogus.


                       117
       Section Two
Exclusions From Coverage

This outlines what is always
disqualified as a claim under
        a title policy.

                         118
       Section Three
Conditions and Stipulations

This describes the rights and
 responsibilities of the title
 company and the insured.


                          119
      SCHEDULE A

 This identifies the legal
  owner, property to be
   insured, amount of
insurance, type of policy,
           etc.       120
   SCHEDULE B
(the meat of the policy)
  Has four “standard
     exceptions. ”


                       121
1. Parties in possession not
shown by the public record.




                        122
2. Easements not shown by
     the public record.




                      123
3. Questions of survey




                     124
4. Unrecorded mechanic’s
          liens




                      125
Waiving the four standard
  exceptions provides
 “extended coverage.”



                       126

								
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