Title Insurance: Not as Mythical as it May Seem
By Jim Clifford
In order to truly understand the title insurance industry, you must be able to see through some commonly misunderstood myths. Being able to recognize these myths and having the ability to discuss the true value of title insurance can help any agent provide a positive buying and closing process for their clients.
MYTH: Title insurance and other title-related charges make up a substantial portion of closing costs and are a major obstacle for moderately priced homes.
FACT: Title insurance and other title-related expenses make up only a modest percentage of the total closing costs normally incurred during the purchase of a residential property.
The other costs associated with a real estate closing make up the majority of costs paid by the seller and buyer. Higher inter-est rates, high down payments, increased construction costs and higher taxes may be cited as barriers to home ownership, but title-related costs have yet to be a serious obstacle and only represent a small portion of the closing expense.
MYTH: Transferring title to real estate is as simple and inexpensive as transferring title to an automobile.
FACT: The value of rights in real estate (real property) often far exceeds the value of the most expensive automobile or other personal property.
There may be literally dozens of persons and entities with different lawful interests and rights in, or claims against, a single parcel of real estate. Scores of claimants and governmental entities have the right to enforce liens, claims and encum-brances against the property. Their rights may emerge for such reasons as civil court judgments, unpaid real property or state or federal income taxes, unpaid claims of
those who make improvements on the property, or even water and sewer assessments.
Since new, existing and evolving laws and records are complex, making an evaluation of the scope and validity of a potential claim or other interest in real property re-quires an experienced professional.
MYTH: Title services are not necessary when property is resold shortly or refinanced.
FACT: This particular “myth” is often the most talked about. Often such a statement is accompanied by an assumption that if there hasn’t ever been a “problem,” the likelihood of a future potential claim is minimal. Truth be told, that is a logical assumption but at the end of the story, its merely an assumption.
Regardless of the length of the intervening time period, a new title search and examination commitment for title insurance and the issuance of a new title policy are needed to fully protect the current owners when they resell or refinance. Every previous owner, adjacent owners, known or unknown heirs and the current seller may have created or experienced recently revealed claims, liens or encumbrances since the most recent policy was issued. Moreover, even though the “insured” on a title policy is the would-be owner (buyer), by virtue of its existence, there is a level of practicable protection that naturally extends to the seller of the property.
If a potential claim that predates the date of the sale were to reveal itself, in the absence of a valid, current title insurance policy, the then owner of the property would logically likely pursue the previous owner for civil relief (lawsuit) of damages that occur as a result of that claim. This is the main reason why it is a custom in many parts of the country (including
Arizona) that the seller pays for the owner’s policy of title insurance for the buyer.When working to understand some of these common myths it is important to know that since its inception, title insurance has offered protection that is significantly different from other lines of insurance. Most other types of insurance (home, auto, etc.) have coverage that extends into the future against claim or loss.
Title insurance, on the other hand, provides coverage against loss from a specific moment in time, then backward. As such, title insurance can be like a warm blanket on a cold night. As long as modern society continues to recognize so many diverse laws, regulations, special interests and the potential claims of loss, transferring title will remain a complex process that requires a true understanding of the process, and not so many myths.
Jim Clifford has over 33 years of experience in the title insurance and settlement services industry. Since 2011, Jim has been the president, COO and a principal partner in Clear Title of Arizona, a full-service title and escrow agency underwritten by First American Title Insurance Company serving all of Arizona. Previously, as the president of The Talon Group, Jim grew three branches to 14 locations in Arizona. Jim has previously served on the Arizona Mortgage Bankers Association, and is a member of the Land Title Association of Arizona. For more information, visit www.cleartitleaz.com or email [email protected].
