TITLE INSURANCE

So, you’re buying a house in Charlottesville. It’s an exciting time. It can also be a bit confusing. Things feel like they’re happening pretty fast and often, some important things can go unexplained—like title insurance. Red Fox Title in central Virginia is here to help.

TITLE INSURANCE

IS YOUR CHOICE

Who provides the title insurance for your real estate closing is your choice. Please contact us if you have questions about title insurance or if you would like a premium quote for your real estate investment.

The professionals at Red Fox Title look forward to the opportunity to earn your business and keeping it local with Red Fox Title.

ABOUT RED FOX
Title Insurance Charlottesville Virginia

WHAT IS

TITLE INSURANCE?

What is a title?

The title to a piece of property is the evidence that the owner is in lawful possession of that property.

What is title insurance?

Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or the defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions.

How does title insurance differ from other insurance?

Insurance such as auto, life, health, etc., protects against potential future events and is paid for with monthly or annual premiums. A title policy insures against events that occurred in the past of the real property and the people who owned it, for a one-time premium paid at the close of the escrow.

What does it cover?

Title insurance protects against claims from defects. Defects are things such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the actual policy.

Who needs it?

Purchasers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from the issuance of title insurance.

How is a title policy created?

After the escrow officer or lender opens the title order, Red Fox Title begins a title search. A preliminary report is issued to the customer for review and approval. All closing documents are recorded upon escrow’s instruction. When recording has been confirmed, demands are paid, funds are disbursed, and the actual title policy is created.

What is escrow?

Escrow refers to the process in which the funds of a transaction (such as the sale of a house) are held by a third party, often the title company or an attorney in the case of real estate, pending the fulfillment of the transaction.

What are the policy types?

A standard policy insures the new owner/homebuyer, and a lender’s policy insures the priority of the lender’s security interest.

WHY DO I NEED

TITLE INSURANCE?

Other types of insurance coverage focus on possible future events and charge an annual premium—such as flood insurance or hazard insurance that safeguard against loss from wind damage. Title insurance protects against loss from hazards and defects already existing in the title and is purchased with a one-time premium.

Title search and examination is the first step.

Insuring a home’s title begins with a search of public land records affecting the property. The title agent or attorney working on behalf of the underwriter examines pertinent documents to determine whether the property is insurable. Those documents include deeds, wills, trusts, outstanding mortgages and judgments, property liens, highway or utility line easements, pending legal actions and notary acknowledgements.

When title problems are disclosed during the search process, they are corrected whenever possible to avoid future claims. According to surveys done by the American Land Title Association (ALTA), title problems consistently arise in one out of three real estate transactions (36%).

A corrective process is vital to curing title problems.

The process of performing title searches and curing title problems does not come cheap. Industry studies find that title insurers spend an average of 92 cents out of every premium dollar as their cost of doing business.

The most common actions to cure title defects include:
  • Releases/pay-offs for liens – 33%
  • Releases/pay-offs for deeds/mortgages – 19%
  • Typographical corrections (names, addresses, legal descriptions) – 17%
  • Clearing estate/family issue – 11 %
  • Clearing physical property issues – 7%<
What if a problem is hidden or missed?

After all this searching and examination, a title problem may still be hidden or missed, such as:

  • A forged signature on a deed
  • An unknown heir who steps forward to claim ownership of the property
  • An expired or forged power of attorney used during a property transfer
  • An incorrect public record

In each of these cases and many more, when there is appropriate title insurance coverage, a policy will offer financial protection. The title insurer defends the title and either perfects the title or pays valid claims.

Why do lenders need It?

Lenders require the homeowner to purchase title insurance, just as they call for fire insurance and other types of coverage to protect their financial investment in the property. A lender’s policy insures that the mortgage is valid and the lien priority is correct. In addition, title insurance is required for lenders who package and sell their loans in the secondary mortgage market.

For the homeowner to be covered, he or she must purchase an owner’s policy in addition to the required lender or mortgagee policy.

A separate owner’s policy is the best policy.

Owner’s title insurance lasts as long as the policyholder or his or her heirs have an interest in the property -maybe even after the homeowner has sold the property. It is either purchased for an additional premium or an owner may pay a simultaneous issue charge (usually a smaller amount) for the separate lender coverage.

How is a title policy created?

Title insurance was first issued in 1871 to enable speed and efficiency when property is conveyed, or legally transferred from one owner to another. Because of title insurance, real estate is more marketable and thus more valuable. It has worked so well to protect buyers and lenders against defects in legal ownership that it is spreading around the world, with Stewart as a primary stimulus of that global growth.

Therefore, while the title industry in many states closes the transaction, handles the escrow and records the documents, it also works to make the title searches even faster, better and more cost-effective. The role of title insurance to fix problems and pay claims is crucial to the marketability of real estate.

HOW DOES TITLE INSURANCE

PROTECT ME?

There are few things in life more important than protecting your home. The following matters are examples of why you need title insurance. Remember that the best title examination or search cannot protect your equity and home from matters not appearing in the public records. However, title insurance* can protect you from:

  • Documents executed under false, revoked or expired powers of attorney
  • False impersonation of the true land owner
  • Undisclosed heirs
  • Improperly recorded legal documents
  • Prescriptive rights in another not appearing of record and not disclosed by survey
  • Failure to include necessary parties to certain judicial proceedings
  • Defective acknowledgements due to improper or expired notarization
  • Corporate franchise taxes as liens on corporate real estate assets
  • Gaps in the chain of title
  • Mistakes and omissions resulting in improper abstracting
  • Improper modification of documents
  • Rights of divorced parties
  • Conveyances in violation of public policy
  • Misinterpretation of wills and ancillary instruments
  • Deeds by persons falsely representing their marital status
  • Claims by creditors of decedent against property improperly conveyed by heirs and devisees
  • Issues concerning unlawful takings by eminent domain or condemnation
  • Special tax assessments
  • Real estate homestead exceptions
  • Forfeitures of real property due to criminal acts
  • Forged deeds, mortgages, wills, releases of mortgages and other instruments
  • Deeds by minors
  • Deeds which appear absolute, but which are held to be equitable mortgages
  • Conveyances by an heir, devisee or survivor of a joint estate who attempts to attain title by ill-gotten means
  • Inadequate legal descriptions
  • Conveyances by undisclosed divorced spouses
  • Duress in execution of wills, deeds and instruments conveying or establishing title
  • Issues involving delivery of conveyancing instruments
  • Deeds and wills by persons lacking legal capacity
  • State inheritance and gift tax liens
  • Errors in tax records
  • Demolition and substandard building liens
  • Administration of estates and probate of wills of missing persons who are presumed deceased
  • Issues of rightful possession of the land
  • Issues concerning the rightful conveyances by corporate entities
  • Deeds and mortgages by foreigners who may lack legal capacity to hold title
  • Legal capacity of foreign personal representatives and trustees
  • Issues involving improper marital status
  • Issues concerning adoption of children
  • Conveyances and proceedings affecting rights of military personnel protected by the Soldiers’ and Sailors’ Civil Relief Act
  • Issues concerning interests noted in financial statements filed under Uniform Commercial Code
  • Interests arising by deeds of fictitious parties
  • Adverse possession
  • Lack of jurisdiction or competency of persons in judicial proceedings
  • Community property issues
  • Utility easements
  • False affidavits of death or heirship
  • Intestate estates
  • Probate matters
  • Federal estate and gift tax

*Subject to certain limitations set forth in the policy.

DO I NEED A

STANDARD OR ENHANCED POLICY?

Title Insurance for the Future

There are few things more important than protecting your home. Owner’s Title Insurance has been offered for more than 100 years, because even the best title search and examination cannot protect your equity and home from matters not appearing in the public record.

The standard policy covers you for defects and liens in the history of your title through the date and time your Deed is recorded in the public records. The ALTA Homeowner’s Policy of Title Insurance provides coverage for many additional risks, including some which might occur after the deed is recorded.

Below is a coverage comparison that will help you decide which policy is the best for you to protect your ownership in your home.

ALTA Member American Land Title Association

STANDARD POLICY

ENHANCED POLICY

Mechanic’s Lien Coverage Covered Under Policy Covered Under Policy
Third Party claims an interest in the title Covered Under Policy Covered Under Policy
Improperly executed documents Covered Under Policy Covered Under Policy
Pre-Policy forgery, fraud or duress Covered Under Policy Covered Under Policy
Non-recorded restrictive covenants Covered Under Policy Covered Under Policy
Defective recording of documents Covered Under Policy Covered Under Policy
Prior recorded liens not disclosed in the policy Covered Under Policy Covered Under Policy
Unmarketability of the title Covered Under Policy Covered Under Policy
Policy insures anyone who inherits the property from you Covered Under Policy Covered Under Policy
Policy insures the Trustee of your estate-planning trust Covered Under Policy Covered Under Policy
Policy insures the beneficiaries of your trust upon your death Covered Under Policy Covered Under Policy
Automatic increase in coverage up to 150% (not based on inflation) Covered Under Policy
Post Policy Forgery Covered Under Policy
Post Policy encroachment onto insured land Covered Under Policy
Legal right to ACTUAL vehicular and pedestrian access Covered Under Policy
Coverage for certain losses due to Building Permit violations
(subject to a deductible and liability limits)
Covered Under Policy
Coverage for certain losses due to zoning law violations
(subject to a deductible and liability limits)
Covered Under Policy
Coverage for certain losses due to existing violation of subdivision law
(subject to a deductible and liability limits)
Covered Under Policy
Post policy structural damage from third party easement for
mineral extraction
Covered Under Policy
Violation of restrictive covenants identified in the Policy:

  • Resulting in loss from correction or removal
  • Resulting in loss of title
  • Resulting in loss of use where single family dwelling prohibited
Covered Under Policy
Forced removal of existing structures that:

  • Encroach onto an easement identified in the Policy
  • Violate a building restriction line identified in the Policy
  • Encroach onto neighbor’s land (subject to a deductible and liability limits if boundary wall or fence)
Covered Under Policy
Land cannot be used for single family dwelling under zoning ordinance Covered Under Policy

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