Real Estate Law Title Examination and Title Insurance Real Estate Law Title Examination and Title Insurance

Subjects Covered: The Function of Title Insurance The Function of Title Insurance Title Examination Process Title Examination Process Title Insurance Preparation Title Insurance Preparation

Introduction A home purchase is the biggest investment most people will make in their lifetime. A home purchase is the biggest investment most people will make in their lifetime. Mortgage loans constitute the nation’s largest single category of institutional investments. Mortgage loans constitute the nation’s largest single category of institutional investments. Real estate is the nation’s largest asset. Real estate is the nation’s largest asset. Title problems arise in one out of every four real estate transactions. Title problems arise in one out of every four real estate transactions.

Top 10 Title Risks 10. Conveyance by heir or survivor of a joint estate, who was convicted of the murder of the decedent. 9. Deed to land including “wetlands” subject to public trust. 8. Deed signed by mistake (grantor did not know what was signed). 7. Undisclosed but recorded federal or state tax lien. 6. Undisclosed but recorded prior mortgage.

Top 10 Title Risks (cont’d) 5. Erroneous or inadequate legal description. 4. Forged notarization or witness acknowledgment. 3. Deed not properly recorded (wrong county, missing pages or other contents, or without required payment). 2. Deed by person who is insane or mentally incompetent. 1. Forged deeds, mortgages, satisfactions or releases.

Title Insurance Issued by a title insurance company after it reviews recorded instruments. Issued by a title insurance company after it reviews recorded instruments. Contract by which a title insurance company agrees, subject to terms of policy, to indemnify the insured against loss sustained as a result of defects in title other than specific title exceptions listed on policy. Contract by which a title insurance company agrees, subject to terms of policy, to indemnify the insured against loss sustained as a result of defects in title other than specific title exceptions listed on policy. Risks are identified and corrected prior to completing the transaction. Risks are identified and corrected prior to completing the transaction. Cost of legal fees to defend attacks on title are covered. Cost of legal fees to defend attacks on title are covered. Title insurance also pays valid claims. Title insurance also pays valid claims.

Title Examination Before real estate is conveyed, it must be proven that Seller has good title. Before real estate is conveyed, it must be proven that Seller has good title. A title search is conducted and an abstract of title and/or title commitment is obtained to protect the purchaser and creditors. A title search is conducted and an abstract of title and/or title commitment is obtained to protect the purchaser and creditors. Abstract Abstract A brief history of instruments appearing in county record that affect title to property.

Title Examination (cont’d) Public records are maintained to help officially: Public records are maintained to help officially: 1. Establish who owns what real estate. 2. Give notice of encumbrances. 3. Establish lien priorities. How do we ensure these records are accurate? How do we ensure these records are accurate? 1. Statute of Frauds requirements. 2. Public recording rules.

Types of Title Searches Title Search And Opinion Title Search And Opinion Search of Public Records Search of Public Records List of Relevant Entries List of Relevant Entries Attorney’s Opinion Attorney’s Opinion

Types of Title Searches (cont’d) Full Abstract Full Abstract Copies of Relevant Portions Of Records Copies of Relevant Portions Of Records Attorney’s Opinion Attorney’s Opinion

Types of Title Searches (cont’d) Certificate of Title Certificate of Title Attorney’s Opinion Attorney’s Opinion

Title Search A title search is an examination of records in the county offices (Recorder, Clerk, etc.) or similar records housed in a title company’s title plant. A title search is an examination of records in the county offices (Recorder, Clerk, etc.) or similar records housed in a title company’s title plant. These records cover all recorded documents, judgments, other liens, general taxes, street easements, sewer assessments, special taxes and levies, and other matters. These records cover all recorded documents, judgments, other liens, general taxes, street easements, sewer assessments, special taxes and levies, and other matters. This review of records provides advance warning so problems can be eliminated whenever possible. This review of records provides advance warning so problems can be eliminated whenever possible.

Title Search (cont’d) Chain of Title: Tract Index Index at recorder of deeds which allocates a separate page to each piece of property in the county. All recorded deeds and other documents relating to property are listed on this page. Grantor-Grantee Index These records show ownership of land passing from one person to another. Because most marketable title legislature only requires us to look back 40 years, start with current owner and go back 40 years.

Attorney’s Opinion An attorney’s opinion is a written statement of an attorney setting forth what he or she believes to be the condition of a real estate title. An attorney’s opinion is a written statement of an attorney setting forth what he or she believes to be the condition of a real estate title. Recourse is against the attorney and then the attorney’s malpractice insurance. Recourse is against the attorney and then the attorney’s malpractice insurance. One year statute of limitations to make a claim. One year statute of limitations to make a claim. With title insurance, direct recourse is against the insurance underwriter with the backing of assets and reserves of a large insurance company. With title insurance, direct recourse is against the insurance underwriter with the backing of assets and reserves of a large insurance company.

Title Abstract – Example of Title Notes Grantee Index: (FIRST ENTRY): , Samson, John–Sarah T. Davis– –WD–Lot 3, Block A, Pines Subdivision–DB 604, Page 91. (SECOND ENTRY): –Davis, Sarah T.–George Farris–6-9-96–WD–Lot 3, Block A, Pines Subdivision–DB 496, Page 831. (THIRD ENTRY): –Farris, George–ABC Co.–2-7-87–WD–Lot 3, Block A, Pines Subdivi­sion–DB 291, Page 204. (FOURTH ENTRY): –ABC Co.–Fred Smith– –WD–20 Acres–Pines Subdivision–DB 283, Page 61. Grantor Index: (FIRST ENTRY): –Smith, Fred–ABC Co.– –WD–20 Acres–Pines Subdivision–DB 283, Page 61. (SECOND ENTRY): –ABC Co.–First Bank– –DSD–20 Acres–Pines Subdivision–DB 283, Page 63. (THIRD ENTRY): –ABC Co.–Georgia Power–7-9-86–EASE–Pines Subdivision–DB 289, Page 150. (FOURTH ENTRY): –ABC Co.–George Farris–2-7-87–WD–Lot 3, Block A Pines Subdivi­sion–DB 291, Page 204. (FIFTH ENTRY): –Farris, George–S.L. of Tucker–2-7-87–DSD–Lot 3, Block A, Pines Sub­division– DB 291, Page 205. (SIXTH ENTRY): –Farris, George–Sarah T. Davis–6-9-96–WD–Lot 3, Block A, Pines Sub­division– DB 496, Page 831. (SEVENTH ENTRY): –Davis, Sarah T.–John Samson– –WD–Lot 3, Block A, Pines Subdivision–DB 604, Page 91. (EIGHTH ENTRY): –Samson, John–Acme Finance– –DSD—Lot 3, Block A, Pines Subdivision–DB 608, Page 200.

Title Policies A title policy describes the property in detail and states what limitations, if any, there are to ownership. A title policy describes the property in detail and states what limitations, if any, there are to ownership. A title policy guarantees that the property is free of undisclosed liens, rights of ownership and guarantees ownership of the property. A title policy guarantees that the property is free of undisclosed liens, rights of ownership and guarantees ownership of the property.

Title Policies (cont’d) Two types of Title Policies: OWNER'S POLICY: If an Owner wishes to obtain a title insurance policy to prove his or her ownership in land, he applies to title insurance company and agrees to pay a one-time fee. The policy is issued in the amount of the real estate purchase, and protects the owner for as long as owner or his/her heirs have an interest in the property. LOAN POLICY: Only protects lender for amount of mortgage loan and risks that affect security interest or lender.

Title Policies (cont’d) Standard Coverage Generally insures against defects in public records, plus things such as forged documents, documents of incompetent grantors, incorrect marital statements. Extended Coverage Everything covered with standard policy, plus additional risks which could be discovered by: 1. Walk-through of property; 2. Inquiries made of persons in possession; or 3. Examining the survey

Title Policies (cont’d) OWNER’S POLICY INSURES PROPERTY OWNER AGAINST: Human errors of lawyers, surveyors, and others that may cause owner financial loss Human errors of lawyers, surveyors, and others that may cause owner financial loss Financial loss due to title defects Financial loss due to title defects Cost of defense in all legal actions or proceedings alleging the title to be other than as insured Cost of defense in all legal actions or proceedings alleging the title to be other than as insured

Title Policies (cont’d) POLICY DOES NOT INSURE: (EXCEPTIONS) (EXCEPTIONS) 1. Defects or liens listed in policy which are specific to property. 2. Unrecorded defects. 3. Rights of parties in possession. 4. Questions regarding survey. Some or all of these can be waived by title insurance companies if presented with appropriate documentation or higher premium. SpecificGeneralGeneralGeneral

Title Policies (cont’d) POLICY DOES NOT INSURE: (EXCLUSIONS) (EXCLUSIONS) 1. Losses resulting from government regulations of property. 2. Losses resulting from government right to take property. 3. Defects or liens: created by insured, known by insured, but NOT by company, causes no loss to insured, created after policy issued.

Quiz True/False 1. The mortgagee’s coverage on a title policy decreases as the loan balance is reduced. 2. Standard exceptions to insurance coverage are found on the front of the title commitment jacket. 3. Real estate taxes are a standard coverage exception. 4. The legal description of the property is found on Schedule B of the title commitment. 5. Part II of Schedule B of a title commitment specifies the requirements that must be complied with in order for the title insurer to issue a policy. T F F F T

Quiz (cont’d) 6. Marketable title means that a property is completely free from any easements. 7. Title insurance is purchased through periodic payment of premiums. 8. An owner’s policy generally covers the purchase price of the real property. 9. The date a document was signed may be relevant in determining the legal sufficiency of the property. 10. Another term for title commitment is title binder. T T T F F