Title Insurance

Heidi Gottlieb 
North American Title
310-995-4173
hgottlieb@nat.com

What is Title Insurance?

Title companies review all of the documents in the public records and in their database which is known as their title “plant”. What the title company wants to see is a complete chain of title of ownership rights passing from one owner to the next with no gaps or missing periods.

There are two types of policies for Title Insurance: Owner’s Title Insurance & Lenders Title Insurance.

Owner’s Title Insurance guarantees the buyer ‘Free and Clear Title‘ for as long as themselves or their successive heirs own the property. Clear title means that the title is free of any liens, defects, or encumbrances – in other words, it is insurance to make sure you actually own the property after you pay for it and close. What happens if somebody disputes your title? The Title Insurance Policy is like liablity insurance, they will defend a lawsuit on your behalf and either settle or go to trail. For Title insurance policies, they don’t have a claim that often, but when they do – they are in the 100’s to the multi Millions! Title companies review all of the documents in the public records and in their database which is known as their title “plant”. What the title company wants to see is a complete chain of title of ownership rights passing from one owner to the next with no gaps or missing periods.

Lenders Title Insurance is a buyer side closing cost for buyers that are obtaining financing. Lenders require buyers to get Lender’s title insurance to protect them from any future claim on title.

In general, I think most people are referring to Owners Title Insurance when they are talking about title insurance but it is good to note the difference.

While you are in escrow, the title insurance company will produce a preliminary title report (prelim) as part of the necessary disclosures that will tell you if the property has clear title or if there are any issues that need to be resolved before close of escrow. Pay extra attention to the list of “exclusions”, if there are any, on the Prelim – as these items will not be covered. Find out what needs to be done to remove exclusions. Any problems or defects the title company finds on their title search are known as “clouds” on title.

Who pays for Title Insurance?

Owners Title insurance is customarily paid by the seller as a seller closing cost in standard sales but like many things in real estate- who pays for Title insurance is negotiable. For Some distressed sales such as foreclosures, bankruptcy, and probate, the seller will often try to push the Title Insurance cost onto the buyer.

Who chooses the Title Insurance Company?

Customarily the seller chooses the title insurance company because they are paying for it, but as a buyer, you can request a particular company if you prefer one of the others. Most of the time the seller doesn’t have a preference / know a title insurance company so they go with their listing agent’s preferred title insurance company.

How does Title Insurance work?

Title insurance works differently then other kinds of insurance because you only pay the premium once up front, and the insurance will protect you and heirs for as long as you own the property. There are no renewals or expiration date.

Title insurance companies not only issue title insurance but are also in charge of recording the grant deed at the County Recorders office, their title insurance begins the moment that the deed is recorded.

How much is Title Insurance?

The title insurance fee varies by the sale price. Expect to pay between $1,500 to $4,000 on Tile Insurance for the average transaction. The rate has a slightly declining fee schedule so as prices go up the fee tappers off. For a 500K transaction title insurance would be $1,500 and for a 2.5M transaction title insurance would be $4,000. After that is about  $1,000 per each Million. 

Should I get Title Insurance?

Buyers don’t even have to ask this question because the seller pays for it, but if the seller is not paying for it in a distressed sale for sale by owner or off market deal- then I highly recommend getting Title Insurance – this is the #1 protection for your investment.  

Title insurance protects you from unexpected clouds on title. 

What does Title Insurance Cover?

1. Someone else owns an interest in your title.
2. A document is not properly signed.
3. Forgery, Fraud, Duress, incompetency.
4. Defective recording of a document
5. Unmarketability of title
6. Restrictive Covenants
7. Lack of a right to access of land
8. Mechanics lien
9. Forced removal of structure- encroachments
10. Forced removal of structure restrictions
11. Forced removal of structure zoning
12. Cannot use land for SFR due to zoning or restrictions
13. Unrecorded liens by Home Owners Association
14. Unrecorded easements
15. Others have rights arising out of leases, contracts or options
16. Pays rent for substitute housing
17. Plain Language
18. Building Permit Violations
19. Subdivision Map Act violations
20. Boundary wall or fence encroachment
21. Post-Policy defect in title
22. Post-Policy contract or lease rights
23. Post-Policy forgery
24. Post-Policy easement
25. Post-Policy limitation on use of land
26. Post Policy encroachment by neighbor other than wall or fence
27. Enhanced access vehicular or pedestrian
28. Damage to structure from use of easement
29 Street address is correct
30 Map shows correct location of the land
31 Exercise of mineral rights
32 Sal falls due to neighbors encroachments
33 Living trust coverage
34 Coverage for spouse acquiring through divorce
35 Automatic policy increase up to 150%
36 Forced removal due to building setbacks
37 Discriminatory covenants
38 Taxing authority assesses supplemental taxes not previously against the land for any period BEFORE the policy date.

Does a Title Insurance Policy Cover Condo Parking Spaces?

Usually no. Most title insurance companies do not cover parking. It is worthwhile to check if that is a concern. Most condos in Los Angeles have deeded parking but some condos, such as highrises with valet may have assigned parking.

I can tell you from first-hand experience with HOAs that some condo board presidents reassigned themselves a parking space and a parking space can be purchased in an parking space only sale, typos in parking plans, or all sorts of weird stuff. There is definitely a reason title insurance wants to stay away from title insurance covering parkign spaces.

Title insurance Companies: