You might be familiar with title insurance if you have ever purchased a home, but just because you have signed the documents, you may not totally understand what it is. During a real estate transaction, the buyer or seller typically hires a title search company to ensure all the documents are in order. This usually happens before the closing or during the mortgage application process.
What is a Title Search?
You may not realize all the risks you’re taking when purchasing a home. Not only are you hoping that the previous owner made all the necessary repairs over the years, but you also assume that everyone who owned the home filled out and filed all their paperwork correctly and that they did not engage in any fraudulent activity related to your property. That’s a lot of faith to put into people you don’t even know! If all the previous owners followed the rules, you should own your property free of any liens or encumbrances).
But, if there was some problem somewhere in the chain of ownership before you, then a third party might be able to step in and sue you, claiming rights to your property. Some of the ways a title issue can arise include:
- Improperly filed deeds, leading to confusion over who owns the property
- Falsified or forged information on prior deeds
- Mortgage fraud
- Liens against the property
- Encroachments/unclear property lines
- Back taxes
Title searches are usually performed by experienced professionals who understand how to find and read government documents in order to determine if, at any point in the property’s history, something has happened that would harm the buyer’s ability to own the property. This could be a simple mistake in the public record, unknown heirs with a claim to the property, any easements, leases, existing lines of credit, unpaid taxes, or other restrictions that could impact the ability of the seller to sell the property to the buyer. A title search looks at all the title transfers throughout the property’s history to see if there are any potential issues. Title searches can uncover liens, deeds, and other issues that might impact the seller’s ability to convey clear title to the property.
What Is Title Insurance?
After the title search is complete, the professionals who conducted the search will typically offer a title insurance policy that states that if they missed something in the search, they —and not the buyer— will assume the liability. Title insurance protects the buyer from title problems that might arise with regard to their ability to own the property.
In the State of Illinois, two different types of title insurance are recognized: owners’ coverage and lenders’ protection. The owners’ title insurance policy is usually for the same amount as the purchase price of the property. It protects the owner against defects in title for as long as the owner and their heirs own the property. In addition, many lenders in Illinois require mortgage title insurance to protect the lender’s interest. Mortgage title insurance is usually purchased for the same amount as the property owner is borrowing from the lender and the amount of the policy decreases as the balance is paid off.
Title insurance is usually purchased in a one-time payment at closing. Whether the buyer or the seller pays for the policy is something that you can negotiate during the buying the process. In addition, the state of Illinois also allows title companies and their customers to negotiate title insurance rates.
How Real Estate Attorneys Can Help
Whether it’s your first real estate purchase or your hundredth, buying property is a complicated, confusing process. Because so much money is at stake, both parties have a lot to lose if something goes wrong. Hiring an experienced real estate attorney can help you navigate the process and protect your interests, from start to finish. Not only will an experienced attorney provide legal advice and guidance, attorneys can also handle the most tedious parts of the transaction, like conducting a title search, writing title insurance policies, resolving disputes over the chain of title on a property, preparing closing documents, and handling the transfer of funds.
The experienced real estate attorneys at Culotta Bravo Law Group can give you the trusted legal advice you need for your Illinois real estate matter. Call us today at 630-898-7800 or contact us online.