1. Title Insurance for Real Estate Professionals

2. CHAPTER 1 THE BASICS OF TITLE INSURANCE “What Does a Title Insurance Company Do?”

3. Title insurance companies "insure” “title” to “real property”

4. “Insure” To indemnify by providing monetary reimbursement for losses.

5. “Title” The rights of ownership in real property.

6. Real property consists of various components.

7. Real Property Components 1. SURFACE

8. Real Property 2. SUBSURFACE

9. Real Property 3. AIR SPACE

10. Real Property 4. RIGHTS

11. Real Property Includes “Improvements.” Attachments to real estate intended to be PERMANENT. Examples: houses, fences, driveways, trees, and bushes…

12. Real Property Includes “Fixtures.” Attachments to improvements that become part of the real estate. Attachments to improvements that become part of the real estate. Examples:heating, plumbing, and electrical fixtures.

13. Exceptions to Fixture Rule Trade fixtures used in a business or trade (usually when leasing). Trade fixtures used in a business or trade (usually when leasing). Emblements, or farm crops, Emblements, or farm crops, can be sold separately from the land. can be sold separately from the land.

14. Chattels Personal property, i.e., EVERYTHING that is NOT real estate. Examples: furniture, furniture, vehicles, vehicles, stocks, and stocks, and bonds. bonds.

15. Chattels Include: cash, cash, contracts, and contracts, and purchase agreements. purchase agreements.

16. Modular Housing— Real or Personal Property? Is it attached as an improvement and taxed as real property?

17. RIGHTS, TITLE, AND INTERESTS Certain rights always belong to the government.

18. Government Rights 1. Police Powers

19. Government Rights 1. Police Powers 2.Eminent Domain

20. Government Rights 1. Police Powers 2.Eminent Domain 3.Taxation

21. Government Rights 1. Police Powers 2.Eminent Domain 3. Taxation 4.Escheat

22. HIERARCHY OF GOVERNMENT RIGHTS

23. Federal government has highest priority, then state state is followed by county county and then municipal municipal.

24. PRIVATE RIGHTS IN LAND These are often discussed in terms of a “bundle of rights.”

25. Title insurance can insure almost any estate in real property: fee title, a mortgage, a land contract, an easement...

26. Three Areas Title Companies Examine to Reduce Risk

27. CONSTRUCTIVE NOTICE The rights shown by the public record.

28. ACTUAL NOTICE This occurs when something can be observed, heard, or sensed.

29. RIGHTS AS CONSEQUENCE OF LAW Unrecorded documents, grantors under legal age, fraud, forgery, duress, insanity, incompetency, unknown heirs, undisclosed marriages, identity theft...

30. CHAPTER 2 THE BUSINESS OF TITLE INSURANCE

31. Title Assurance vs. Title Insurance Title assurance is a broad term Title assurance is a broad term including surveys, maps, title opinions, and anything having to do with title. Title insurance is a specific contractual obligation. Title insurance is a specific contractual obligation.

32. Alternative Products to Title Insurance Casualty insurance products Casualty insurance products Borrowers credit score Borrowers credit score “Owner and encumbrance” reports “Owner and encumbrance” reports

33. Title Insurance Protects Everyone Lenders, buyers, and real estate agents

34. Lenders Title policies indemnify lenders against loss. Title policies indemnify lenders against loss. Use standardized forms andhomogenize state laws. Use standardized forms andhomogenize state laws. Help home ownership by making Help home ownership by making sale of mortgages easy.

35. The Secondary Market This ensures a constant source of money for housing. Financiers require title insurance to title insurance to protect their investment.

36. Title Insurance Protects Homeowners and Their Investment

37. Title Insurance and the Real Estate Agent BEWARE! Never tell your buyer they don’t need an owners policy. You may be at risk if there is a problem later!

38. Title Companies may “insure over” or provide “affirmative coverage” for problems for lenders. Insurance over a title problem is often available to the owner. Ask for it!

39. Recognize a “Notice of Title Defect.” It is information important to the buyer. !!!

40. Owner Policy Is Different From Lender Policy Owner’s policies are for Owner’s policies are for the full sale price the full sale price of the property. of the property.

41. Owner Policy Is Different From Lender Policy Lender’s policies only cover the loan amount, not buyer’s equity.

42. Owner Policy Is Different From Lender Policy Owner’s coverage can last forever, as in corporate ownership or a trust.

43. Owner Policy Is Different From Lender Policy Mortgage policies decrease in value as the loan is paid down and expire when the loan is paid off.

44. A title company is either a title insurer (a.k.a. title underwriter) or a title agent. Title Agent Title Underwriter

45. Title insurers take liability under the policy. Title agents write policies of title insurers.

46. Closing Liability vs. Title Insurance Liability

47. Title policies indemnify only title issues

48. Protect the Lender & Buyer Closing protection letters from the underwriter indemnify closing errors and theft of funds by a title agent.

49. CHAPTER 3 MYTHS AND TRUTHS

50. TOP SIX MYTHS ABOUT TITLE INSURANCE

51. MYTH Title insurance is a “guarantee” of good title.

52. TRUTH Title insurance cannot “guarantee” good title. Fraud, forgery, misrecorded or unrecorded documents, and undisclosed heirs all cause loss of property. TRUTH Title insurance cannot “guarantee” good title. Fraud, forgery, misrecorded or unrecorded documents, and undisclosed heirs all cause loss of property.

53. MYTH When a lender’s policy is issued, title must be “good.” MYTH When a lender’s policy is issued, title must be “good.”

54. TRUTH Even though a lender’s policy exists, title may not be good. Title companies take calculated risks. TRUTH Even though a lender’s policy exists, title may not be good. Title companies take calculated risks.

55. MYTH Title insurance is like other forms of insurance.

56. TRUTH Title insurance is not like other types of Insurance Title insurance covers past risks, not future risks like fire insurance. TRUTH Title insurance is not like other types of Insurance Title insurance covers past risks, not future risks like fire insurance.

57. Title insurance is not like other forms of insurance. What the consumer does to their own title after they purchase property is not covered.

58. Title insurance is not like other forms of insurance. The title industry is one of risk elimination not risk assumption.

59. Title insurance is not like other forms of insurance. Investigating title in order to insure it is expensive.

60. Title insurance is not like other forms of insurance. Title issues today are riskier than those in the past because of fraud, forgeries, etc.

61. MYTH Very few files have title problems.

62. TRUTH One in four files have title problems!

63. MYTH Title companies rarely pay.

64. TRUTH Title claims are skyrocketing! In 2003 title industry paid out $661.7 million in claims

65. Title companies pay. Remember: Title insurance covers fraud, forgery, incompetence, duress, errors in records, survey issues, identity theft, and more.

66. Real estate is a detailed and complex business with many places to make mistakes.

67. Title policies provide a contractual duty to defend any covered claim, valid or not. Defending a claim is costly.

68. CHAPTER 4 HOW TO READ TITLE WORK LIKE A PROFESSIONAL

69. A title commitment is the document that shows all title research done on a property through a particular date. It is used to prepare closing documents.

70. Understanding the Layout of a Title Commitment

71. Cover sheet or jacket Standard language pertaining to terms of the policy

72. Schedule A Identifies the property, the insured, policy amounts, how seller holds title, and a precise legal description. Schedule A Identifies the property, the insured, policy amounts, how seller holds title, and a precise legal description.

73. Schedule B The “meat” of the title and key to closing. Where to concentrate your efforts.

74. Title Exceptions Found on Nearly All Properties

75. Real estate taxes are a government right. They are handled at closing per the purchase agreement.

76. Assessments, a charge for the improvement of property. Handled at closing per the purchase agreement.

77. Easements are authorized uses of land for a specific purpose.

78. Types of Easements Utility and drainage easements are most common. Consumer should be aware of their location and size.

79. Types of Easements Blanket easements cover a large tract of land without being specifically located.

80. Types of Easements Common driveway easements occur when two adjacent parcels share access.

81. Types of Easements Wetlands or environmental easements require the owner NOT to change the habitat.

82. Mortgages/deeds of trust pledge the property as security for a loan.

83. Covenants, Conditions, and Restrictions (CC&Rs) These can be “deed restrictions” i.e., restrictions contained within a single deed to limit use of property.

84. Covenants, Conditions, and Restrictions (CC&Rs) These most often cover an entire subdivision.

85. Common interest communities occur when owners share such things as access, party walls, parking, and utilities. CC&Rs cover these issues.

86. Covenants, Conditions and Restrictions Be sure the buyer reads these before the closing!

87. UNDERSTANDING AND REMOVING TITLE ISSUES

88. Understand the language so you can resolve the problem. Encumbrances—any claim on title. Liens—a type of encumbrance that can be removed with money.

89. Liens are classified as specific liens or general liens

90. Examples of Specific Liens Specific liens attach to specific real estate. Mortgages $ Mechanics Liens Real Estate $ Taxes $

91. Examples of General Liens General liens attach to people.. State Tax Liens Judgments State Tax Liens Judgments Child Support Federal Tax Liens

92. ...and everything the people own including real estate. General Liens ex: STL, FTL, JU

93. An attorney’s lien is filed for services rendered by an attorney.

94. Financing Statement A lien filed on personal property.

95. Mechanic’s liens come about when material or labor are supplied to build, renovate, or repair property.

96. Judgment Liens These are obtained by court order.

97. State tax liens are government liens for non-payment of state taxes.

98. Federal Tax Liens

99. Child Support Liens These are general liens for non payment of child support.

100. Federal district court judgments tend to be large national lawsuits with large awards.

101. RED FLAG AREAS FOR CLOSING

102. Bankruptcy A way to temporarily suspend and possibly prevent debt collection for those debts listed at the time of the bankruptcy petition.

103. Cloud on Title This is a generic name for any item that might make title unmarketable. Cloud on Title This is a generic name for any item that might make title unmarketable.

104. Homestead Exemption Issues This is a law that protects a portion of the value of an owner’s principle residence from unsecured creditors.

105. Eminent Domain The government’s taking of land for the public good and with just compensation.

106. Abstracts of Judgment This is a lien in favor of the U.S. government or any U.S. agency that is good for 20 years.

107. Pollution Control Liens These are liens by any government agency for land clean-up.

108. Decrees of Dissolution (Divorces) These can create title issues. Watch for: transfer of title to one party, liens, name changes, or special stipulations.

109. Notices of Lis Pendens This is a legal document stating that a law suit has been commenced on the property. Notices of Lis Pendens This is a legal document stating that a law suit has been commenced on the property.

110. CHAPTER 5 UNDERSTANDING TITLE POLICIES

111. Title companies deal with problems differently. You can shop a title company for the coverage you want.

112. Marketable Title vs. Insurable Title vs. Salable Property

113. Two Primary Types of Policies Lender’s and Owner’s

114. All title policies have the same five sections

115. Section One Standard insuring provisions 1.Title to the estate is as described in Schedule A. 2.There are no defects liens or encumbrances on title except as shown.

116. 3.A legal right of access to and from the land exists. 4. Title is marketable.

117. On all policies, the title insurer has a duty to defend, whether or not the claim is bogus.

118. Section Two Exclusions From Coverage This outlines what is always disqualified as a claim under a title policy.

119. Section Three Conditions and Stipulations This describes the rights and responsibilities of the title company and the insured. Section Three Conditions and Stipulations This describes the rights and responsibilities of the title company and the insured.

120. SCHEDULE A This identifies the legal owner, property to be insured, amount of insurance, type of policy, etc. SCHEDULE A This identifies the legal owner, property to be insured, amount of insurance, type of policy, etc.

121. SCHEDULE B (the meat of the policy) Has four “standard exceptions. ”

122. 1.Parties in possession not shown by the public record.

123. 2. Easements not shown by the public record.

124. 3.Questions of survey

125. 4. Unrecorded mechanic’s liens

126. Waiving the four standard exceptions provides “extended coverage.”

127. Schedule B (the meat of the policy) In addition to the four standard exceptions, all known title issues are listed on Schedule B. Schedule B (the meat of the policy) In addition to the four standard exceptions, all known title issues are listed on Schedule B.

128. Endorsements These are used to modify the policy, by adding or deleting coverage. They are critical to a transaction.

129. The new ALTA Homeowner’s Policy of Title Insurance is the Cadillac of title policies. It provides 29 specific coverages, including some into the future.

130. CHAPTER 6 TITLE INSURANCE REQUIRES PROFESSIONALS

131. People in the Title Process

132. Order processor

133. Title searchers / abstractors

134. Title examiners

135. Attorney / closer Closing assistant

136. Recording specialist Recording specialist

137. Other Title Company Personnel Marketing staff Customer service Recordkeeping Title plant personnel Policy preparation Management Accounting

138. Title companies insure BILLIONS of dollars each year in real estate.

139. They work with legal records, examining old and creating new.

140. Title companies deal with lender requirements, 20-page purchase agreements, and the stress of buyers and sellers.

141. They work hard to make transactions go smoothly and accurately.

142. It takes a lot of skilled professional people to make the transaction go well.