UNDERSTANDING TITLE INSURANCE

In Arizona, most real estate transactions are closed with a title insurance policy.

Many erroneously assume that possession of the deed to the property is all they need to prove ownership. This is not true. Unknown title defects may attach to real estate. A property owner’s greatest protection is a policy of title insurance.

What is Title Insurance?

It is a contract of indemnity and guarantees that the title is as reported and, if not reported and the owner is damaged, the title policy covers the insured for their loss up to the amount of the policy.

Title insurance assures owners they are acquiring marketable title. Title insurance is designed to eliminate risk to loss caused by defects in title. Traditional title insurance provides coverage only for title problems that were in existence at the time the policy was issued. More extensive coverage is now available through as ALTA residential policy (the Plus Policy).

The Title Search:

Title companies work to eliminate risks by performing a search of public records or through the title company’s own plant. The search consists of public records, laws and court decisions pertaining to the property to determine the current recorded ownership, any recorded liens or encumbrances or any other matters of record that could affect the title to the property. When a title search is complete, the Title Company issues a commitment detailing the matters affecting title and the requirements for issuance of a policy.

Commitment for Title Insurance:

The commitment for title insurance (often called a prelim) indicates all the items or situations that pertain to the subject property. It is a detailed report of findings from a title company search. It sets forth the current status of the property ownership, matters affecting the title that will appear as exceptions or exclusions to the policy, and requirements of reissuing a policy. When you receive the prelim, you should review it carefully, paying attention to the sections identified below:

  • Make certain the ownership vesting is correct by comparing the names on the commitment to those on your Deed.
  • Review the informational notes for important property facts.
  • Carefully review the exceptions: bonds, deeds of trust, current taxes, CC&R’s and easements.

INSURANCE AND POLICY COVERAGE:

The commitment for title insurance (prelim) indicates a multitude of items or situations that pertain to the subject property.

Commitment:

The commitment for the title insurance (prelim) indicates a multitude of items or situations that pertain to the subject property. It is a detailed report of findings resulting form a title search. It explains the current status of the property ownership, title insurance of-fered by the title company, and any exceptions or exclusions to the policy. Upon receipt, you should review your prelim paying particular attention to the sections listed below.

Reviewing the Commitment:

  • Be sure the ownership vesting is correct by comparing the names on the prelim to those on your purchase contract.
  • Review the informational notes for important property facts.

Standard Policy Coverage:

  • A title policy is guaranteed insurance against any undetermined risks. Review the fol-lowing list for items and issues covered by a title policy.
  • Mistakes in interpretation of legal documents and wills.
  • A forged signature on the deed.
  • Errors in indexing or coping.
  • Falsification of records.
  • Impersonation of the real owner.
  • Deeds delivered without consent of grantor.
  • Recording mistakes.
  • Missing or undisclosed heirs.
  • Deeds and mortgages signed by persons of unsound mind, by minors or by someone listed as a single but actually married.
  • In regards to lender’s coverage, the title policy covers:
  • Invalidity of the insured assignment.
  • Priority of the insured mortgage.
  • Invalidity of the insured mortgage on the title.

Items and Issues that are not Covered:

  • Matters that an accurate survey would show; easements, boundaries, etc.
  • Matters assumed, known or created by the insured.
  • Rights of parties in possession.
  • Unpatented water or mineral rights.
  • Unrecorded matters.
  • Matters that a physical inspection would disclose.

 

TITLE INSURANCE ENHANCED

ALTA Homeowners Policy:

We are pleased to introduce the ALTA Homeowners Policy which provides enhanced coverage concerning access, location, encroachments, violations of restrictions, subdivision law, building permit requirements, surface entry for water or mineral extraction, and supplemental taxes. It also provides important Post Policy protection from forgery,encroachment, and conveyance to a trust.

The ALTA Homeowners Policy additionally offers the highest appreciation coverage,automatically increasing the value of your policy to 150% during the first five years you own your new home. It gives you additional coverage for the following risks:

  • Building permit violations
  • Subdivision compliance
  • Restrictive covenants violations
  • Post policy forgery
  • Post policy encroachment
  • Post policy structural damage from minerals extraction
  • Post policy Living Trust coverage
  • Enhanced Access – Vehicular and Pedestrian
  • Map not consistent with legal description
  • Automatically Inflation Potection (5 years)
  • Supplemental Tax Lien coverage
  • Enhanced encroachment protection (public utility easement)
  • Water rights extraction coverage

You Get ALTA Plain Language Coverage:

  • Someone else owns an interest in your title.
  • A document is not properly signed.
  • Forgery, Fraud, Duress.
  • Defective recording of any document.
  • There is a lien on your title because there is a:
    • Deed of trust
    • Judgment, tax, to special assessment
    • Charge by the homeowner’s association
  • Title is unmarketable.
  • Mechanic’s lien protection.
  • Forced removal of structure because it:
    • Extends on to other land or on to an easement.
    • Violates a restriction on Schedule B.
    • Violates an existing zoning law.
  • Can’t use land for a single family dwelling because use violates a restriction in Schedule B or a zoning ordinance.
  • Pays rent for substitute land or facilities.
  • Unrecorded lien by a homeowner’s association.
  • Unrecorded easements.
  • Rights under unrecorded leases.

The ALTA Homeowners Policy……..is available for an owner-occupied, one-to-four-family residence or condominium unit. Some of the covered risks are subject to a separate deductible amount (1%) and to a separate maximum dollar limit ($10,000 – $25,000).

 

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