Frequently Asked Questions
This section gives you answers to the questions we hear most often from home buyers and from our clients.
What is meant by “Title”?
“Title” is the foundation of ownership property. A title gives you a legal right to possess that property and to use it within the restrictions imposed by authorities or limitations on its use, superimposed on the basic right to possession by previous owners.
What is Title Insurance?
Title insurance is used by homebuyers and lenders for protection against back taxes, undisclosed liens, legal judgments, forgeries, fraud and a host of other potential legal/financial problems that can arise when purchasing or refinancing property.
Do I need Title Insurance?
Absolutely! Title Insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protect you from financial loss, title insurance pays the cost of defending against any covered claim.
Am I legally required to have title insurance?
You are not legally required to have title insurance. If you pay cash for your property you could do without it, but you would leave yourself open to a potentially devastating loss if the property turns out to have a defective title. If you carry a mortgage, the lender almost always requires you to buy a loan (or, lender) policy to protect its interests.
How much title coverage do I need?
Generally, your policy should provide coverage in an amount equal to the purchase price of your home. The lender’s policy covers the amount of the mortgage.
If the title company does a thorough records search, why do I need the insurance?
There’s always the possibility that the title searcher missed something. But there’s also the possibility that there were defects or discrepancies the title searcher could not have found such as forged signatures or misfiled liens or judgments.
Does the amount of coverage increase as the value of my property increases?
There may be a cost of living adjustment in your basic policy, but that does not typically keep pace with increases in the market value of your property. You may want to purchase an inflation rider that will increase the coverage amount as the value of your property increases.
How much does title insurance cost?
In many states, including New York and New Jersey, the premium rates are set by the state. That means the premium, or cost of coverage, is the same regardless of which insurance company you choose. Depending on the age of the current policy and other factors, you may be eligible for a reissue rate, and that can mean significant rate reductions. You should ask the title officer about it. In addition to title insurance premiums, there are often local fees for recording documents.
Who pays for title insurance?
Most often the home buyer pays for both the owner’s policy and the lender’s policy. The premium is included as part of the closing costs. In many states (NJ, for example) the cost for a loan policy is a nominal fee added to the owner’s policy premium.
Why does buying a home differ from all other purchases?
No other property has a useful life that compares with that of land. Owners die, new ones succeed, but land goes on forever. Owners of goods may change their locations at will, but land is immovable, it lends itself to the absorption of innumerable rights. Over the ages, this so impressed lawyers and jurists that they formed a separate body of laws for land. These laws, creating many types of rights in land, are so numerous and so complex it is impossible for there to be a mathematical certainty of ownership.
Since the lender already requires Title Insurance, won’t that protect me?
Not necessarily. There are two types of Title Insurance. Your lender likely will require that you purchase a Lender’s Policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it. An Owner’s Policy, on the other hand, is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your 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.
What is a title defect?
Anything in the entire ownership of a piece of real estate which may encumber the owner’s right to the “peaceful enjoyment” of the property or which may cause the owner to lose any portion of the property.
The contract I signed makes the sale subject to title to the property’s being good. Doesn’t that protect me?
If anything should happen to defeat the issued title insurance policy, your cause of action would be against the Seller, and his or her ability to pay. Attorney’s fees and expenses would not be covered.
The real estate broker said the title is good. Isn’t that good enough?
No one can be sure the title is clean. That’s why you need a title company as well as title insurance
What happens if my home is protected by title insurance and the title is challenged?
Simply notify the title insurance company and they will defend the title, even if it goes to court. The title company also bears all expenses.
How much does Title Insurance cost?
The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you, or your heirs, own the property.
Can Montgomery Hills Title Services handle my closing?
Yes. We are a clearinghouse for all parties involved. We collect all the necessary documentation – assuring adherence to the lender’s title instructions, making arrangements for payment and distribution of funds. Montgomery Hills Title Insurance is geared up to work with you from the start of your transaction all the way through to conclusion.