F.A.Q's for Sellers

What is Title Insurance?

Suppose you purchase your dream house and when you arrive in your overloaded moving van, only to find someone else in the house claiming ownership.  What would you do?  Or suppose you are awakened early one morning by a construction crew preparing to bulldoze your entire front yard for a railroad track to be built on an easement claimed to pass through your yard.  What happens now?  What if you received a notice of past due property taxes which must be paid within a few days or the property will be put up for sale?  An Owner's Policy of Title Insurance is designed to prevent these problems from ever happening, and give you a source of protection if something unforeseen does occur.

Title Insurance is the only guaranteed protection against real estate title losses.  It insures your ownership of your home.  Your lender will require Lender's Title Insurance, but that only protects their interest.  It insures the lender for the original amount of the loan against invalidity of the mortgage which secures the loan.

The Owner's Policy of Title Insurance protects you.  It informs you of any other interest in the property, such as liens and encumbrances, and protects you against unknown claims of ownership to your interests in your property.

Most people have fire, car, and life insurance.  You pay premiums every year to continue your protection.  When you purchase an Owner's Title Insurance Policy, you pay your premium only once for coverage that will protect your initial investment for as long as you own your home.

Title insurance protects you from hidden risks not revealed by an examination of the public records.  Common examples of hidden risks include:

Forgery or Fraud
Missed Taxes
Undisclosed or missing heirs
Incorrect legal descriptions
Conveyance by a minor
Incorrect indexing at the courthouse
Mental incompetence of grantors
Missed easements

Check for title problems if you plan to sell a house.

by Armond D. Budish and Kurt Karakul
SPECIAL TO THE PLAIN DEALER - FEBRUARY 24, 2001

Interest rates are low and experts predict this spring will be a good time to sell your home. If you are thinking about selling, there are steps you can take now to prepare for a smooth sale. 

Review deed, title policy 
In order to sell your home, you must convey clear title. Many home sellers have no idea if there is a title defect that might prevent them from conveying clear title. You should review the deed and the title insurance policy you reúceived when you bought the home. These documents can reveal potential problems for your sale. If you are unfaúmiliar with what to look for, contact the title company or consult with an experiúenced real estate attorney. 

Tile commitment
A review of your deed and title insurance policy will reveal potential title problems that existed when you bought the home. But what about title problems cropping up during the time you owned the home? These problems will be reúvealed by a title company performing a new title search.

If you want to be assured that there are no problems, contact a title company to conduct a title search and issue a title commitment. These are required anyúway when you find a buyer. By doing the search early, you give yourself time to clear up any defects.

A title search should take no more than two weeks. The title company will issue a title commitment that will list any recorded defects to the title.

Potential defects
What type of defects can come up? The title commitment will list any mortgages and judgment liens listed in the public records that have been filed against your property. We’ve counseled home sellers who have discovered that the mortgage of the party they bought the home from was never canceled. To remedy this, contact the lender or the escrow agent who handled your initial purchase. If one or both of these are no longer in business, the process of clearing this mortgage may take a long time.

We’ve also seen title commitments that list other potential problems, such as:

Judgment liens resulting from court actions that the seller was unaware of. For example, you may have been sued, but for some reason never notified, and the other party may have obtained a deúfault judgment that now exists as a lien against your property.

Judgment liens against a party with a name similar to the seller’s. For people with unusual names, this-isn’t much of a problem. But if your name is John Smith, you may have problems: A judgment against another John Smith may have mistakenly become a lien against your property.

Easements or title restrictions that imúpose limits on the use of the property or prohibit decks, fences or other additions.

Mortgage liens from equity lines of credit that you never used but still must be canceled.

Title vested in deceased parties or diúvorced parties.

Oil and gas or other mineral leases.

Each of the previous items may create an objection to title that a buyer is unúwilling to accept. Most can be deleted or removed from the title if you have time to deal with the problem.

Title defects don’t prevent the sale of a home very often, but if you are one of the unlucky ones it can cost you time and maybe even cause you to lose your sale. Title problems can be avoided by hiring a title company early in the process to do a title search and issue a title commitúment. Review the commitment with your attorney to ensure that defects are dealt with before you find a buyer.