© 2008 Dearborn Real Estate Education CHAPTER 5 UNDERSTANDING A TITLE POLICY

© 2008 Dearborn Real Estate Education List 2 types of policies and cite the differences Recognize and explain parts of the policy LEARNING OBJECTIVES

© 2008 Dearborn Real Estate Education Discuss coverage of the newest 2008 owner’s title policy Explain coverage on the newest 2008 lender’s policy Learning Objectives

© 2008 Dearborn Real Estate Education Review Key Terms Check off any you do not recognize

© 2008 Dearborn Real Estate Education Title Policies Changed in 2008 Coverage was increased Language was simplified The many policies available for single family housing were reduced to just the 2008 owner/lender policies

© 2008 Dearborn Real Estate Education Title companies deal with problems differently. You can shop a title company for extra coverage you want.

© 2008 Dearborn Real Estate Education Marketable title vs. Insurable title

© 2008 Dearborn Real Estate Education Insurable title vs. Salable property

© 2008 Dearborn Real Estate Education The two primary types of policies - Lender’s and Owner’s

© 2008 Dearborn Real Estate Education ALTA 2008 title policies all have the same six elements

© 2008 Dearborn Real Estate Education 32 COVERED RISKS INCLUDING Someone has an interest other than disclosed Forgery or Impersonation Invalid documents

© 2008 Dearborn Real Estate Education 32 COVERED RISKS INCLUDING Undisclosed Liens including: –Taxes, –Assessments, –Mortgages, – Judgments, – State or Fed Tax Liens, –Mechanic’s Liens, –Homeowners Association Liens

© 2008 Dearborn Real Estate Education Covered Risks include a guarantee for “Legal Access” Legal Access is different from Physical Access ?

© 2008 Dearborn Real Estate Education All policies have a Duty To Defend regardless of the fact the claim seems bogus Duty to Defend

© 2008 Dearborn Real Estate Education EXCLUSIONS Outline what is disqualified as a claim under the policy Government Rights Built according to local building code

© 2008 Dearborn Real Estate Education EXCLUSIONS disqualify as a claim Risks created, allowed or agreed to by the insured

© 2008 Dearborn Real Estate Education EXCLUSIONS disqualify as a claim under the policy Failure to pay value for your title

© 2008 Dearborn Real Estate Education Property lying outside of insured property such as roads, easements, or lakes EXCLUSIONS disqualify as a claim

© 2008 Dearborn Real Estate Education CONDITIONS describe the rights and responsibilities of the Title Insurer and the Insured

© 2008 Dearborn Real Estate Education CONDITIONS: Insured must Provide Proof of Loss Cooperate with Insurer Allow Insurer to start any legal actions

© 2008 Dearborn Real Estate Education CONDITIONS: Insurer has Rights To pursue litigation To cure the title To negotiate a settlement

© 2008 Dearborn Real Estate Education Enhancements to the 2008 Policy Temporary Housing Coverage for loss of property use due to title problem, including cost of moving personal property and cost to repair property caused by moving.

© 2008 Dearborn Real Estate Education Policy increases 10% per year for first 5 years up to 150% of purchased amount. Enhancements to the 2008 Policy

© 2008 Dearborn Real Estate Education CONDITIONS Insured agrees to SUBROGATE her rights under the policy

© 2008 Dearborn Real Estate Education CONDITIONS: Insured agrees to ARBITRATE any policy of $1,000,000 or less Over $1,000,000 both Insurer and Insured must agree

© 2008 Dearborn Real Estate Education SCHEDULE A identifies the exact legal owner, name of buyer/borrower, name of insured, legal description, amount of insurance, type of policy, etc.

© 2008 Dearborn Real Estate Education The 2008 Policy has “Extended Coverage” it now covers: Parties in possession not shown by the public record Easements not shown by the public record Questions of Survey Gap period

© 2008 Dearborn Real Estate Education SCHEDULE B is the Meat of the policy All exceptions to title are shown here.

© 2008 Dearborn Real Estate Education The 2008 LOAN POLICY COVERED RISKS Mortgage has priority over other liens Address is as shown on policy There is a 1-4 family residential structure on the land Zoning laws allow the structure The parcel has been legally subdivided

© 2008 Dearborn Real Estate Education LENDER CONDITIONS Title Insurer can pursue litigation for so long as it deems necessary

© 2008 Dearborn Real Estate Education LENDER CONDITIONS If title cannot be cleared, policy increases by 10% over remaining loan balance Arbitration over $2,000,000

© 2008 Dearborn Real Estate Education LENDER EXCLUSIONS Lender must comply with local business laws Lender must comply with usury laws

© 2008 Dearborn Real Estate Education ENDORSEMENTS Used to modify a policy by adding or deleting coverage. They can be critical to closing a transaction.

© 2008 Dearborn Real Estate Education The New 2008 Title Policies provide more coverage than ever, including some potential future problems.

© 2008 Dearborn Real Estate Education REVIEW QUESTIONS