How are Title Insurance Rates set?
How title insurance rates are set varies from state to state. Some rates are set by the companies themselves and some are set by the State Department of Insurance. For those states that set the rates such as Florida, each title company is required to charge the same for title insurance for each different type of policy and for each different type of rate. When shopping in the states listed above, you will receive similar rates for title insurance from each company. While title insurance rates may be standardized in these states, the cost of other services provided by the title company may or may not be similar.
As mentioned above, some rates may or may not include other services provided by the title company such as conducting the closing, preparing and notarizing documents, adding endorsements to the policy which may be required (usually by the lender or buyer), and other services. When comparing one rate to another, be sure to get detailed information on what is included in that rate.
What is meant by "title?”
"Title" is synonymous with legal ownership of property. It legitimates your right to "peaceful enjoyment" of the property you own, within restrictions or limitations of use imposed by government authorities. A "Clear Title" means ownership is without blemish. A "Cloud on Title" indicates that some inconsistency exists which may blemish ownership if not corrected. A "Defect in Title" is indicative of an encumbrance or a more severe problem needing remedy. Finally, a "Failure of Title" demonstrates failure to convey ownership from one owner to the next.
What is a title search?
A title search is a thorough review or examination of the public records that pertain to real property ownership and the rights/limitations of its use. The search period begins with the current owner(s) and extends back in time for a period of 60 years (commonly referred to as the "chain of title"). All documents affecting the subject property are reviewed for accuracy, completeness and proper execution. Similarly, all owners of record during the search period are indexed to determine their ownership interests, marital status and legal and mental capacity to enter into a contract to sell/buy real property. All conveyances must have been properly conducted and approved by the appropriate governmental departments
What is title insurance?
Real estate title insurance, unlike most types of insurance, insures the property title for the time period extending backward from the date of the policy rather than forward, protecting against losses arising from events occurring prior to the date of the policy. The title insurance guarantees a buyer's ownership and peaceful enjoyment against claims, liens or judgments associated with a property after the purchase is completed.
Unlike Real Property or Casualty Insurance where coverage starts on the day a policy is issued, title insurance, being Indemnity Insurance, causes coverage to stop on the day the policy is issued. Its coverage extends backward in time and guarantees that events prior to your ownership do not result in losses to you.
This means that when a buyer purchases a piece of Florida real estate, a Florida title insurance policy insures or otherwise guarantees that the buyer is protected if a hidden defect in the property title is subsequently discovered. Any hidden risks such as forged or missing documents, back taxes, legal judgments, mistakes in recording legal documents, undisclosed liens and liens for unpaid estate, inheritance, income, or gift taxes, fraud and a host of other potential legal/financial problems could potentially lead to loss of title to the property and a significant financial loss.
Title insurance will pay for 100% of all expenses in defending you against any lawsuits attacking the title as insured, and will either clear up the title problems or pay the insured's losses up to the amount of the policy. For a one-time fee, a buyer's title insurance policy remains in effect as long as the insured has an interest in the property. If the insured should die, the coverage automatically continues for the benefit of their heirs. If the insured sells the property, giving warranties of title to the buyer, the insured’s coverage continues.
36 Reasons For Title Insurance - Insured Title Defects and additional advantages:
Some of the most common HIDDEN RISKS examples that can cause a loss of title or create an encumbrance on title may include, but are not limited to, any the following situations:
Seller fraudulently sold the property to another buyer.
Prior seller fraudulently sold the property to more than one buyer.
Seller purchased the property while committing mortgage fraud.
A deed or a mortgage may have been signed by a person under age.
Older unrecorded deed transferring the property which is now recorded.
A deed or a mortgage may have been made under a power of attorney after its termination and would, therefore be void.
Seller or prior seller may have outstanding personal judgments which could attach to the property.
Forged deeds, mortgages, satisfactions or releases of mortgages, and other instruments.
Impersonation of the true owners of the land by fraudulent persons.
Outstanding prescriptive rights not of record and not disclosed.
A deed or a mortgage may have been made by an insane person or one otherwise incompetent.
Undisclosed or missing heirs.
Liens from unpaid estate, inheritance, income, and gift taxes.
A judgment or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding.
Defective acknowledgment due to lack of authority of notary. (Acknowledgment taken before commission or after expiration of commission.)
Descriptions apparently but not actually adequate.
Boundaries may be incorrect and part of the property may actually be owned by an adjacent neighboring property owner.
Structures on the property may encroach onto valid easements or an adjacent property.
Deed from bigamous couple - prior existing marriage in another jurisdiction.
A deed or mortgage may be voidable because it was signed while the grantor was in bankruptcy.
Mistake in recording legal documents. (For example, incorrect indexing or errors and omissions in transcribing, and failure to preserve original instruments.)
Special assessments where they became lien upon passage of resolution and before recordation or commencement of improvements for which assessed.
Recorded easement, but erroneous ancient location of pipe or sewer line which does not follow route of granted easement.
Undisclosed divorce of spouse who conveys as sole heir of deceased consort.
Deed from record owner of land where he has sold property to another purchaser on unrecorded land contract and the purchaser has taken possession of premises.
Tax titles invalid because of irregularity of proceeding, reversal of court decisions, or lack of decisions on points of law.
Fraud, duress or coercion in securing essential signatures.
Deeds by persons of unsound mind.
Invalid, suppressed, undisclosed, and erroneous interpretation of wills.
Mistakes made during the examination of the title of the property.
These examples are only a few of the issues which can appear and affect the title of property. There are many more potential problems, including issues involving real estate developers, condominium conversions, permit liens, utility liens, survey errors or omissions, water rights and access, docks, condominium association mortgages and foreclosure liens and filings.
Additionally, title insurance has the following advantages:
Title insurance covers attorneys’ fees and court costs.
Title insurance helps speed negotiations when you’re ready to sell or obtain a loan.
By insuring the title, you can eliminate delays and technicalities when passing your title on to someone else.
Title insurance reimburses you for the amount of your covered losses.
Each title insurance policy we write is paid up, in full, by the first premium for as long as you or your heirs own the property.
Over the last 24 years, claims have risen dramatically.
Why does a buyer need title insurance?
When a buyer purchases a property they expect to enjoy certain benefits from ownership such as to be able to occupy and use the property as they wish, to be free from debts or obligations not created or agreed to by them, and to be able to freely sell or pledge the property as security for a loan. Title insurance is designed to insure these rights.
Without an Owner’s Title Insurance Policy, a buyer will not be fully protected against errors in the public records, hidden defects not disclosed by the public records, or mistakes made during the examination of the title of your new property. As a result, the buyer may be held fully accountable for any liens, judgments or claims brought against their new property. However, an Owner’s Title Policy insures that if such an occasion arises, the insured will be defended, free of charge against any lawsuits regarding all covered claims and will either clear up the title problems or pay the insured's losses up to the amount of the policy.
In every real estate transfer the matter of title examination invariably arises, and that is usually followed by a question as to the need/nature of title insurance. Admittedly, the ordinary consumer/home purchaser often questions whether title insurance is really necessary when an examination of the title has been completed by an accomplished title examiner or real estate attorney, especially if the examination of available title records shows no adverse information which might raise questions as to the marketability of the title.
"But I have a deed and a title search was originally conducted," many people say, "isn't that all I need?" No! A deed is not proof that the seller is actually the owner. Nor does it contain information regarding the rights others might have in the property, unpaid taxes, mortgages, easements, and restrictions. "Can't I find out about their rights from the public records?" Yes, most of them. However, all of the necessary information is not contained in a single book, in a given office, or even in the same county. Add to this the possible errors in indexing, improper searching, and errors in examination, in other words, the human element. Besides, what is not in the public records is often what causes title trouble.
What types of title insurance policies are available?
In general, there are two different types of title insurance policies available. The Owner's Title Insurance Policy which offers protection only to the owner against defects in their title to real estate. The Lender's Title Insurance Policy is meant to insure and protect only the lenders' loans against defects and losses until the mortgage is paid off. Consequently, a Lender’s Policy does not provide coverage to the owner in the absence of the Owner’s Policy. A new Owner’s Policy need not be necessary when refinancing an existing property; however the lender will require the purchase of a new lender policy.
Why does a lender require title insurance?
A lender will go to great lengths to minimize the risk of lending money for the purchase of real estate. First, credit is checked as an indication of the borrower's ability to repay the loan. Then, the lender seeks assurance that the quality of the title to the property to be pledged as security for the loan is satisfactory.
The lender does this by obtaining a loan policy of title insurance. The loan policy protects the lender against loss due to unknown title defects and any other hidden risks until the mortgage is paid off. You will have to pay for the Lender’s Policy during the close of escrow. This will be one of the conditions the lender will stipulate to give you the loan.
Since the lender requires title insurance, won't that protect the buyer?
No, there are two types of title insurance policies: A Lender’s Title Insurance Policy and an Owner’s Title Insurance Policy. Your lender likely will require that you purchase a Lender’s Title Policy. As stated above, this policy only insures that the financial institution has a valid, enforceable lien on the property with the priority that the lender requires. Additionally, the Lender’s Policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless the claim threatened the lender's ability to foreclose and recover its principal and interest. And in the event of a claim, there is no provision for payment of legal expenses for an uninsured party (i.e. the owner). Most lenders require this type of insurance, and typically require the borrower to pay for it.
An Owner’s Title Policy, on the other hand, is designed to protect the owner from title defects that existed prior to the issue date of your policy. Title clouds or defects, such as unknown liens, improper estate proceedings or pending legal actions, could put the owner’s equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your Owner’s Title Policy covers the full cost of any legal defense of your title.
The additional cost of an Owner’s Title Policy is nominal when purchased at the time of settlement simultaneously with the Lender’s Title Policy.
How long does title insurance protect the property owner?
For a one-time fee, an Owner’s Title Insurance Policy provides protection indefinitely remaining in effect as long as the insured has an interest in the property. If the insured should die, the coverage automatically continues for the benefit of the insured’s heirs. If the insured sells the property, giving warranties of title to the buyer, were the insured covenants with the buyer that not only has the insured not personally done anything to adversely affect the title being conveyed, but neither has anyone else who has ever owned the property, the owner’s coverage continues to insure the owner regarding said warranties.
What is the function of a title insurance company?
Legal statutes provide that buying and selling of real estate must involve an independent third party to facilitate the performance of escrow, closing and settlement, and the issue of title policies. A full service title company performs the search on the property, conducts the requisite due diligence to review the Chain Of Title, identify any inconsistencies, liens, judgments, etc., issue the Commitment To Insure, manage the funding through escrow accounting, coordinate all activities between the buyer, seller, realtors, mortgage brokers, lenders etc., conduct the closing, disburse funds, issue the Title Insurance Policy to both the buyer and lender, and finally get all required documents recorded to establish your ownership.
Who decides on the selection of a title agent?
We recognize that whether you are a buyer or seller, you have the right to choose your title company. Where most real estate buyers and sellers once let their agents select the title insurance company for them, today's customers are highly educated and experienced in measuring the power of their investment. Some would have you believe that generally the right to choose a title company rests with the party paying for such service, or the lender, mortgage broker or real estate agents. In reality however, that right was, is, and will always remain a negotiated one.
A one-time investment:
When you purchase a Title Insurance Policy, you pay a single, one time fee based on the value of the property being insured. Yet, the policy provides protection indefinitely remaining in effect as long as the insured has an interest in the property. Title Insurance premiums are based on the purchase price of the property. The rates are set by the Insurance Department of the State of Florida and are the lowest rates allowed by law. Check out our Rates page for more information.
What is homestead?
The Florida Constitution provides that any real property, condominium, mobile home, etc., which serves as a permanent residence of a Florida citizen is entitled to homestead benefits and exemptions. In order to benefit from this provision, the owner is required to file and record a "Notice of Homestead" in the official records of local county circuit court. Homestead property is protected from (1) forced sale by creditors, and entitled to (2) property tax exemptions permitted under the law. Additionally, a spouse cannot transfer or mortgage the Homestead property with out consent of the other spouse. Both spouses must execute the deed and/or the mortgage for the transfer to be completed or the mortgage to be perfected.
What is a 1031 Exchange?
Internal Revenue Tax Code Section 1031 allows taxpayers to defer tax on capital gain realized (typically on the difference between the property's adjusted basis and the sale price) from the sale of property ("relinquished property") which is held by the taxpayer for investment or productive use in a trade or business by reinvesting the proceeds in another property of like kind ("replacement property"). A 1031 exchange is possible only when you sell real estate held for investment purposes. It cannot be used for the sale of your personal residence. Consult IRS rules for the definition of like kind and what types of properties qualify as like kind.
In order to preserve the exchange element and prevent taxpayers from merely selling relinquished property and buying replacement property, a taxpayer's access to the sales proceeds is restricted during the exchange period by requiring a third party (qualified intermediary) to hold the proceeds and disperse the same for the replacement property. At closing, proceeds are transferred to the qualified intermediary to hold the funds until they are used to acquire the new property. The seller is allowed up to 45 days from such sale to identify the like-kind property where sales proceeds are to be applied and up to 180 days to actually close the acquisition.
What is FIRPTA?
FIRPTA stands for Foreign Investment in Real Property Taxation Act of 1980, which is part of the Internal Revenue Tax Code. The Act was enacted with the intent of recovering at least a portion of the taxes (based on the Sale Price and not the proceeds to the seller) due on the sale of real property by a foreign seller. A foreign seller may be a Non-Resident Alien individual, corporation, partnership, trust or estate.
The code requires that on all transactions over $ 300,000, the buyer withhold 10% of the purchase price from the seller at closing, and remit the withheld amount to the IRS along with Forms 8288, 8288A & 8288B completed and signed by the buyer, within 20 days of the closing. All parties to the transaction must have a TIN (Taxpayer Identification Number), which may be a Social Security Number or an ITIN (Individual Taxpayer Identification Number) assigned by the IRS via a W-7 application form. Buyers and sellers are advised to check and confirm necessary actions for complying with this code and also for exceptions applicable under certain conditions.
