Basic level real estate service would be delivering you the documents involved in title research and the insurance binder and letting you wade through the book–sized document on your own. Believe it or not, that’s the approach many real estate agents take, and some don’t even give the documents a cursory once–over. It’s true that properties that have changed hands before, generally don’t have major title issues, but you can never know for sure without a thorough reading and understanding of the documents involved.
There are also restrictions and covenants revealed in your Title Binder or Commitment package that you may not have known about when you made your offer. Though you may have read disclosure documents or even a copy of subdivision or condominium covenants, it could be that there have been changes since it was printed. The only way you would find out is to read your title insurance binder’s copy of the documents, as it will include the latest documents as recorded at the courthouse. You may also find some recent filings related to obligations of the homeowner association that could result in future expensive assessments.
Any covenants and restrictions you notice in these documents that may restrict your use of the property in a way that causes you to reconsider your purchase would be important, and you’ll not want to miss them. Let’s say that you have a recreational vehicle and intend to park it on your property. Maybe you even plan on creating a shed for it. Any restrictions to the contrary would be important to you, and I'm committed to helping you to uncover every important item in your title insurance documents.
Along with all of those documents that look like a large encyclopedia, there are two sections at the front of the title insurance binder (or commitment) that summarize what’s included and can give you a quick overview to guide you to the most important items first, or those of most concern. These two sections are the “Requirements,” and the “Exceptions.” Requirements are things the title company says must be done or criteria met before their binder is good and title insurance will be issued. Generally, these are pretty cut-and-dried, such as the seller paying off any mortgages or liens against the property, paying current taxes due, etc.
The “Exceptions” are where you’ll find the things that could be a problem for you, such as those restrictions we discussed above. However, some people aren’t quite up-to-speed on what an exception is and what it means that an item is excepted. Most of the benefit of title insurance comes from protection from threats to your ownership or things that come up about property lines or encroachments. When something is already recorded at the courthouse, the title company will not cover you against it in the future, as it’s a “done deal,” and normally can’t be changed. Those restrictions and covenants are that way. If they say you can’t store that RV, then you can’t claim damages later when you try to do that. So, anything that’s already of record will be “excepted,” and you just need to be sure that there isn’t anything in that pile you can’t live with.
You’re the customer, and your money is making this deal work, so don’t be shy about asking any and all questions you have about the documents, requirements and exceptions in the title binder. There are deadlines for objections to what you find that could result in the deal dying, so don’t hesitate to get right to the examination of this document and the attachments.
WHAT IS TITLE INSURANCE?
AND DO I NEED IT?
Is it just an unnecessary expense?
Absolutely not! A change in land ownership, requiring a formal transfer of title involves risk that the title may be defective. Title insurance is your guaranteed protection against real estate title losses. Actually, title insurance is one of the best insurance values available. The premium you pay is based on the purchase price of your property. Rates are regulated by the state, and you only pay a one-time premium when you purchase your policy. North Carolina property owners enjoy rates for title insurance premiums that are among the lowest in the nation. This coverage lasts as long as you own your property, and will protect you even after you sell your property.
What is Title Insurance?
A title policy insures the condition of your title or ownership rights to a certain piece of property. Before a policy of title insurance can be issued in North Carolina, a title examination must be conducted under the supervision of an independent attorney licensed to practice law in North Carolina. We believe that this requirement has directly led to North Carolina having one of the very lowest costs in this country, to the owner, for assuring title. The high standards of education and professionalism required of an attorney to be licensed in North Carolina contribute directly to our having a lower rate of claims than most states that do not require attorneys in the process. The attorney carefully researches all relevant recorded documents affecting ownership of the property being examined necessary to determine the status of the title. The attorney will then submit a title opinion to the company. Typically, the title company will then issue a "binder" or "commitment" to the lender and owner, which obligates the company to insure the title as described by the attorney, with certain limitations and requirements. A title insurance commitment describes your property in detail and states what limitations, if any, the final title policy will include when the company issues it to you and your lender. Even the most thorough search will not reveal any "hidden defect" that is not shown on the public records. Such a defect may be a problem caused by an inadequate survey, a clerical error, confusion over names, forgery, fraud, unrecorded claims for improvements or numerous other possible problems. Careful attorneys can not reasonably be expected to discover title problems that are not revealed in the public records. Therefore, the examining attorney is not responsible to you for dealing with these issues when they arise after closing. Without title insurance, you are on your own! Title insurance does not guarantee that title defects do not exist or will never occur. It does insure you against possible losses through certain claims against your title as a result of conditions not revealed on your policy.
Is there a difference between coverage to the lender and coverage to the owner?
Yes. there are actually two types of coverage, Lender's Coverage and Owner's Coverage. At one time, title insurance was not required by the lenders in North Carolina. Those days have passed and now virtually every lender in the state requires a Lenders Policy of Title Insurance on most real estate transactions. Lenders now recognize the potential impact of the "hidden risk" factors of any real estate transaction, and require a title insurance policy to protect the amount of money they loan to purchase the property. Property owners in North Carolina benefit from what is referred to as a "Simultaneous Issue Rate". When a lender's policy is requested at the same time an owner's policy is ordered, it is included in the owner's policy premium without additional charge. Through an Owner's Policy, a buyer obtains more protection. This policy covers the owners interests exclusively. Coverage will include protection of the total purchase price. A policy of title insurance will provide security in ownership, assist in a quick transfer of the property when it is sold. Title insurance will guarantee payment of legal costs to defend your title and payment of all covered, successful claims up to the face amount of the policy. Because the risks are different, lenders are often given coverage that owners are not. A lender's coverage terminates when the loan is paid off.
Are all Title insurers the same?
Definitely not. The strength and financial viability of a title insurer is based on the amount of premium revenues generated per year and the amount of surplus funds (reserves) available to pay out possible claims. RE/MAX of Greensboro and Realtor® Michael Jones is proud to offer three of the top five financially strongest and oldest firms doing business in this country, First American Title, Old Republic Title and Chicago Title.
Do I have a choice in selecting a Title Company?
Absolutely. North Carolina law specifies that it is illegal for any lending institution to require the use of any one specific company or in any way limit your choice among approved insurers. As a consumer, and possibly a first-time home buyer, it is in your best interest to know which title companies are available, which insurer will afford you the most stable coverage and which one can provide you with prompt, reasonable claims service when needed. Your attorney is best qualified to make a recommendation as to which company is best for your needs. A closing attorney in North Carolina is prohibited from being an agent or employee of a title company and also prohibited from receiving anything of substantial value except as payment for services. Therefore your attorney can make an independent recommendation, unbiased by financial interest. The choice is yours.