1. What is title insurance?
2. Why do I need title insurance?
3. What is the difference between an Owner’s Policy and a Mortgage Policy? Why do I need both?
4. What is the cost of Title Insurance?
5. What defects are insured against?
6. How am I protected is a claim arises?
7. If I have Title Insurance, do I also need legal advice?
8. What is a 1031 Tax-Deferred Exchange?

What is Title Insurance?

Title Insurance is the modem method of real estate title protection. A policy of title insurance protects the insured against a partial or total loss arising out of defects, liens and encumbrances in the title to real estate.

Why do I need title insurance?

Under our American system, any interest in land must be recorded in the public records if the holder of that interest wants to be protected. Once it has been so recorded, all subsequent parties are presumed to know of its existence, since it is on the public record for all to see. Therefore, the public records must be thoroughly searched in order to determine the ownership of any piece of land at any given time, and in order to know whether there are any mortgages, liens or other encumbrances outstanding against it. Out of the millions of documents on record, it is imperative that a prospective buyer or lender find all those which affect the title to his/her particular parcel. Obviously, this is a job for experts who specialize in this field. Their carefully prepared, meticulously maintained indexes, and their highly trained, skilled personnel, enable them to make a thorough search of the records in a fraction of the time it would take a layman and to certify their findings to the prospective buyer or lender. Unfortunately, however, there are many possible defects in the title, such as forged documents, documents executed by legal incompetents, etc., which even the most painstaking search of the records would not disclose. Consequently, the ultimate protection is a policy of title insurance.

What is the difference between an Owners Policy and a Mortgage Policy? Why do I need both?

An Owner’s Policy protects the interest of the owner of real estate and lists the name(s) of the new buyer as the insured party. As the new buyer, you will want assurance from the seller that the title is marketable and free from liens that could create problems in the event you should decide to sell or refinance the property in the future. The Owner’s Policy does assure that the title is marketable and provides for defense of the title at the expense of the insurance company, if it is challenged or questioned by others. The Owner’s Policy is mailed directly to the new owner, unless otherwise specified. A Mort:a:e Policy protects the interest of the mortgage lender and lists the lender as the insured party. All lenders require the borrower to provide proof and assurance that the loan being applied for will be in the correct lien position. If the validity of the lien of the mortgage is challenged or questioned, the policy provides for defense of the mortgage interest. The Mortgage Policy is mailed directly to the lender.

The Owner’s Policy is always in the full face amount thereof, and continues as long as the owner or his/her heirs have an interest in the property, while the Mortgage Policy protection terminates immediately when the loan is paid off.

Note: In this area it is customary for the seller to incur the cost of the Owner’s Policy and the buyer to incur the cost of the Mortgage Policy.

What is the cost of Title Insurance?

The cost depends upon the face amount of the policy issued. The face amount is normally the market value of the real estate in the case of an Owner’s Policy, and the amount of the loan in the case of a Mortgage Policy. Only one premium I paid and the protection lasts as long as the insured has any interest in the property. When property is transferred or sold at a later date and an existing Owner’s Policy is surrendered, an Owner’s Policy will be issued protecting the new purchaser at a reduced premium. When an owner’s Policy and Mortgage Policy are issued simultaneously on the same land, special reduced rates are applicable.

What defects are insured against?

Your title policy will protect you against any defects, not excluded from the coverage of the policy, which cause actual loss or unmarketability of title. Such defects include errors in description, errors in searching the public records, unpaid taxes, legal incompetence of parties, fraud, forgery, outstanding dower rights, defects in the execution of instruments, and many others.

How am I protected is a claim arises?

To name a few:

• Mistakes in recording of legal documents
• Forged deeds, releases or wills
• Undisclosed or missing heirs, including spouses
• Deeds by persons of unsound mind
• Deeds by minors
• Deeds executed under invalid or expired power of attorney
• Liens for unpaid taxes
• Fraud

When you obtain a mortgage, the property you purchase is pledged as security for the loan. To protect against risk, the lender requires assurance that the title to the property is clear, and this is done through a loan policy of title insurance. However, without an owner’s policy of title insurance, the buyer is unprotected.

An owner’s policy of title insurance is a contract that protects you, according to the contract terms, against loss or damage due to title defects. This contract is backed by the known assets and reserves of the title insurance underwriter and serves as a written guarantee that your underwriter will undertake, at its own expense, the defense of your title in all legal actions or proceedings alleging the title to be other than as insured.

For a onetime premium, paid during the closing process, an owner’s policy of title insurance protects against future losses arising out of past events. In most cases, an owner’s policy can be issued at the same time as the loan policy, usually for a nominal onetime fee. Ask your real estate professional about purchasing an owner’s policy of title insurance from Landco Enterprises Insurance Agency and their underwriters with the financial strength, national presence and quality service you need to make the protection of your investment easy and affordable.

Under the terns of your title, Landco Enterprises will, at its own expense, defend you against any adverse claim or legal action arising out of any encumbrance or other defect insured against, and will also indemnify you against any loss resulting therefrom up to the face amount of the policy.

If I have Title Insurance, do I also need legal advice?

Yes. The Title Insurance policy does not take the place of legal counsel. In every real estate transaction there are many matters not covered by your policy which require the advice of an attorney. The coverage of the policy itself, and the specific exclusions therefrom, your rights and obligations as a seller or purchaser, the tax consequences of your transaction — these and many other issues should all be fully discussed and explained by a qualified attorney.

What is a 1031 Tax-Deferred Exchange?

A 1031 Exchange, when properly structured, allows an investor to sell property and reinvest the proceeds from that sale into a new property and defer all capital gain taxes.  Section 1031 of the Internal Revenue Code provides:

“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”

To find out if your transaction qualifies for Section 1031 deferral, contact us.

Our Promise

Meeting the needs of our customers is not just our goal — it’s our promise! We at Landco Enterprises strive to offer only the best in customer service. Whether you are buying, selling or refinancing your home, the steps involved in a real estate transaction can be confusing. Our experienced staff at any of our offices can help eliminate any confusion you may feel by assisting you with any concerns, questions or suggestions you may have.