Sometimes title problems occur that could not be found in the public records or are inadvertently missed in the title search process. If you are obtaining a loan to purchase your house, the lender will usually require that you purchase a Loan Policy to protect their investment. To help protect you in these events, it is recommended that you obtain an Owner’s Policy of Title Insurance for a one-time fee to insure you against the most unforeseen problems. Who pays for the Owner’s Policy varies from state to state and sometimes even within a state.
Owner’s Title Insurance, called an Owner’s Policy, is usually issued in the amount of the real estate purchase or sales price. It is purchased for a one-time fee at closing and lasts for as long as your buyers or their heirs have an interest in the property. Only an Owner’s Policy fully protects the buyer should a covered title problem arise with the title that was not found during the title search. Possible hidden title problems can include but are not limited to:
- Errors or omissions in deeds
- Mistakes in examining records
- Undisclosed heirs
Receiving an Owner’s Policy isn’t always an automatic part of the closing process, and is paid for by different people in different parts of the country. No matter who pays for the Owner’s Policy, the fee is a one-time fee paid at closing.
Most lenders usually require a Lender’s Policy, also referred to as a Loan Policy, when they issue a loan. The Loan Policy is typically based on the dollar amount of the loan and protects only the lender’s interests in the property should a problem with the title arise. It does not protect the buyer/borrower even though the borrower is required to pay for the fees associated with obtaining a Lender’s Policy. Also, the policy amount decreases each year and eventually disappears as the loan is paid off. Therefore, it is strongly suggested that an Owner’s Policy be offered in conjunction with the Lender’s Policy to cover the buyer/borrower’s equity in the property.
Here at CATC, we offer a unique title policy for use with construction loan financing. Our temporary construction policy is a cost effective option for your borrowers on the construction financing portion of the transaction.
Our temporary construction product offers a discounted premium of $1.00 per thousand ($100 minimum premium) but the benefit of this product is that it affords coverage from potential losses and damages because it is an actual insurance policy. The cost of the temporary construction policy paid by the borrowers can be applied to the end-loan policy in the form of re-issue credit.
As important as the basic policies, are the numerous endorsements available on forms approved by the American Land Title Association (“ALTA”).
Almost 80 different endorsements are available, some of which are included only in owner’s policies and some only in lender’s policies. They cover such widely varying issues as zoning, covenants, encroachments, usury, subdivision, survey matters and environmental matters. The price of each endorsement varies – some are issued for no cost, some carry nominal charges of $50 or $100, and some, such as zoning, can cost several thousand dollars. Certain endorsements will only be issued upon satisfying specific requirements. For a complete listing of available Endorsements and their descriptions, please click here.