Title Insurance Defined
“An insurance policy that protects the homeowner or the lender against possible loss or damage arising through defects in title to real estate.”
Title Search Steps
- A Preliminary Report (PR) is prepared by a Title Company when buyers and sellers have executed their purchase contract and open escrow.
- The PR shows the ownership of a specific parcel of land and lists, in advance of the home purchase, title defects, liens, and encumbrances that will not be covered under the title insurance policy.
- If the PR shows items that are objectionable to the buyer, the buyer can ask the seller to remove or correct the items.
- If the PR has so many defects that cannot be rectified, a lender may think the property is too risky and may choose not to make a loan for the purchase of the property.
Factors That Can Affect a Home’s Title
Deeds establish a chain of title, but sometimes those chains contain errors or are broken. In addition, title searchers also look for reconveyances (proof that the encumbrances are paid off), and they look for easements, rights-of-way, Covenants, Conditions, and Restrictions, and other elements affecting title to the property. Here are some additional items searched to piece title together:
- Marriage records
- Death certificates
- Tax sales
Three Types of Title Insurance Coverage
Homeowners and consumers can choose among a variety of options, but the top three choices are Owners, Lender’s, and Extended Coverage.
Basic Owner’s Title Policy Coverage
- Provides clear title to the property
- Protects against Incorrect signatures on documents, forgery, fraud
- Recording errors
- Erroneous covenants
- Encumbrances or judgments
Basic Lender’s Title Policy Coverage
- This policy is not required for an all cash purchase
- This policy only covers the lender and not the homeowner
- Mechanic’s liens and unrecorded liens
- Unrecorded easements
- Other unrecorded documents and encumbrances
Extended Owner’s Coverage
- Extended Owner’s Coverage is Optional Coverage
- Building permit violations (from previous owners)
- Subdivision map errors
- Living trusts
- Other encroachments and forgeries after title insurance is issued
Who Pays For Title Insurance In San Diego
- As always any and all cost relating to a home purchase are negotiable and delineated in the purchase agreement
- In San Diego the sellers frequently pay for the Owner’s Title Policy
- In San Diego the buyers frequently pay for the Lender’s Title Policy
- Extended Owner’s Coverage is optional and would usually be paid for by the buyer
How Long do Title Policies Last
Title insurance last for as long as you own the home. If you are considering selling your home within a couple years of your initial purchase, ask your title company about purchasing “Binder” coverage. Some title companies may sell you what is referred to as a Binder policy for a fee 10% more. A Binder policy generally last for two years, and you can essentially re-use the Owner’s Policy you obtained for your purchase for the buyer of your home for either a small fee or no fee. You are required to use the same Title Company that issued your original Owners Policy.