Through our relationship as fee attorneys for Community National Title, Smith Reed & Armstrong, PLLC can offer full-service title work. This includes providing title insurance and closing services on any type of real estate transaction.
What is title insurance?
Title insurance is an insurance policy which protects people from losses arising from a real estate purchase. These losses might include:
- unpaid property taxes;
- fraud or forgery of a previous deed; and
- a spouse or unknown heir who makes a claim against the property.
As part of the process for issuing the title insurance policy, we search to identify defects in the title that need to be corrected before the sale is finalized. To do this we search public records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps.
As licensed attorneys, Pearland’s title agency Smith Reed & Armstrong, PLLC can easily walk you through the title insurance process.
What Types of Title Insurance are Available?
There are two types of title polices – owner’s policies and loan policies.
The owner’s policy protects the buyer’s interest in the property. The policy protects the buyer from the covered risks listed in the policy. The price of the policy is usually included in your closing costs and policy premiums are set at a certain level under Texas law. An owner’s policy only covers you up to the value of the property at the time it was purchased. It doesn’t cover any increase in the property’s value, unless an increased value endorsement is purchased.
An owner’s policy remains in effect as long as the buyer or his/her heirs own the property or are liable for any title warranties made when the property is sold.
A loan policy protects the lender’s interest. A loan policy covers up to the amount of the principal on the loan. Loan policies are effective until the loan is repaid. Lenders will require the buyer to buy a new loan policy if the home is refinanced. When the new loan pays off the existing loan, the old loan policy expires.
Title policy forms in Texas are standardized. This means most of the policy language is the same regardless of which title agent sells the policy. Title agents are required to use the standardized forms.
The policy is based on the title commitment received from the title agent. Carefully read the commitment, especially the items in Schedule B and Schedule C. It is possible remove an exception if a title problem is cleared up or if additional coverage is purchased.
Check the legal description of the land against the survey to confirm that what is conveyed in the contract is accurate. Title insurance doesn’t protect against boundary disputes with neighbors, unless additional coverage is purchased.
How Much Does a Title Policy Cost?
Rates are based on the property’s sale value. The Texas Department of Insurance sets title insurance premium rates. All title agents charge the same premium for property of the same value.
The basic premium rate includes the cost of title examination, closing, and issuing the policy. You pay a title policy premium only once, at the closing of the sale. Charges for tax certificates, escrow fees, recording fees, and delivery expenses are added to the costs of closing.
What Does a Title Policy Cover?
The owner’s policy protects against losses from ownership problems which occurred before the property was purchased. Examples include fraud, errors or omissions in previous deeds, or forgery of a previous deed. The owner’s policy protects the buyer from the covered risks listed in the policy.
The loan policy protects the lender’s interest in the property until the borrower pays off the mortgage.
Both types of policies provide coverage if:
- someone else owns an interest in the land;
- there’s no right of access to and from the land; or
- there are liens on the title for labor and material from before the policy effective date that you didn’t agreed to pay.
What Doesn’t a Title Policy Cover?
Title insurance doesn’t insure against fire, flood, theft, or any other type of property damage or loss. A homeowners insurance policy covers these types of losses. Title insurance doesn’t protect against boundary disputes with your neighbor, unless you buy an endorsement adding that coverage.
A title policy won’t cover:
- defects that are created after the policy is issued;
- defects that you create, or that you had knowledge of;
- problems that arise because of your failure to pay your mortgage or to obey applicable laws or restrictive covenants that you were told about;
- taxes and assessments;
- losses resulting from rights claimed by someone else occupying the land (unless you pay the title agent to have the property inspected and coverage added); and
- homestead, community property, or survivorship rights of a policyholder’s spouse. Texas homestead laws address the rights of a spouse or survivors of a property owner.