Q: What is a title insurance policy?
A: When you purchase, finance or refinance real estate, typically the purchaser or the lender requires that the seller/owner provide a title insurance policy as part of the sale/finance. A title insurance policy insures that the purchaser (an "Owners Policy") is getting good title to the property or that the lender (a "Mortgagee's Policy") is ending up in a first position on the title. If, at a later point in time, someone else comes forward to claim a superior title position, then the title insurance policy will take care of it.
Both kinds of policies start with a Commitment from the title company setting forth the following: (1) Schedule A, which shows the current owner, proposed purchaser or lender, amount of the insurance and the legal description of the property; (2) Schedule B-1, which sets forth the requirements of the title company that must be performed before the policy will issue (things such as releases of existing mortgages, payment of any tax liens, etc.); and (3) Schedule B-2, which shows the Exceptions to the title that the title insurance company will not insure against - things such as utility easements, Homeowner Association Declarations, zoning laws, and the like.
Schedule B-2 also contains "Standard Exceptions, " such as title issues which would be shown by a current survey, rights of persons not shown of record, and other similar issues. These Standard Exceptions can be removed if the owner or purchaser is willing to pay for endorsements to the policy.
When you buy a piece of real estate, you typically have the right to cancel the contract if there are title defects which are unacceptable to you. We would be happy to review your title insurance commitment with you to help you decide if the property you wish to buy contains any title issues.