Northern Virginia, DC & Maryland Real Estate

What is Title Insurance? Why should you get it?

There may be hidden risks connected with the title of your new property. In fact, 1 in 4 transactions have a title defect. These occur often as a result of errors made during past title transfers. Title insurance insures that the title to your property is clear, with no known liens or encumbrances, such as unpaid property taxes, recorded liens, or street and sewer easements. If a title defect is discovered after the policy is issued, your title insurance company will seek to resolve it. No matter how far back the title issue goes, any claim would be filed against the property (and current owner), even though the claim is from the past.

There are two types of title insurance policies, Lender's and Owner's:

Lender's title insurance, also called the loan policy, protects only the lender's interest in the property and only for the life of the loan. Every lender will require that a title insurance loan policy be issued for the purchaser's loan. Once the loan is paid off, the coverage provided under the policy expires. Hence, a Loan Policy affords no protection for the homeowner.

Owner's title insurance protects the purchaser's interest in the property and that coverage continues for their lifetime. Owner's coverage is important because liability for title defects can survive beyond the ownership interest of the purchaser. Even if a claim against the insured property is not valid, the protection of owner's title insurance remains important because the policy provides for defense of such claim.

What kinds of problems do title professionals look for? They research the complete history of a property by scouring through public records and their own title plants to ensure there are no hidden problems. If they find an issue, they take care of it-typically without you even knowing about it. Or, if the problem is not easily resolved, they will notify you before you close.

The best title examination or search cannot protect your equity and home from matters not appearing in the public records. However, the best title policy can protect you from:

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

Now that you know what title insurance is, the risks involved in purchasing a home and the mitigation that Title Insurance provides, you are in a better position to decide to buy owner's title insurance or not.

Besides obtaining homeowner's Title insurance, you should decide if you want a standard or enhanced policy. The following will detail the key points that differentiate these policies:

ALTA Standard vs. ALTA Extended

Coverage
ALTA
Standard
ALTA
Extended
A third party claims interest in the titleXX
Improperly executed documentXX
Pre-policy forgery, fraud, or duressXX
Defective recording of documentsXX
Non-recording of documentsXX
Liens not disclosed in the policyXX
Unmarketability of titleXX
Mechanic's liens claimsX
Forced removal of structure because it:X
- extends onto other land or onto an easement
- violates a restrictive covenant in Schedule B
- violates an existing zoning law
Land cannot be used for single family dwelling
because use violates a restriction in
Schedule B or a zoning ordinance
X
Unrecorded easementsX
Rights under unrecorded leasesX
Building permit violationsX
Subdivision map act violationsX
Restrictive covenant violations in:X
- Loss of title
- inability to obtain a loan or close a sale
- loss due to enforcement
Enhanced vehicular and pedestrian accessX
Map not consistent with legal descriptionX
Post policy forgeryX
Post policy encroachment onto insured landX
Post policy structural damage from mineral extractionX
Post policy living trust coverageX
Post policy automatic increase in coverage to 150%X


NOTE: This is a summary for purposes of convenient comparison. All references to coverage are made subject to the actual language of the policy form and schedules. Deductibles and special liability limitations apply to some coverages.