Why Florida Home Buyers Need Title Insurance - Even When Paying Cash

What is Title Insurance? Title Insurance protects you against losses due to defects in the title to the property and expenses in legal defense.

Your ownership is authenticated and will be promptly defended against any claims in court, if necessary at no cost to you, whether a claim is valid or not.

If a valid claim is made against your title as covered by your policy, the title insurer protects you by bearing the cost of settling the claim should it prove valid, in order to protect your title and keep you in possession of your property.

Title Insurance is Purchased before "Settlement" of a Real Estate Transaction (also known as a Closing)

What is a Title Search?

A title search is a detailed examination of the historical records concerning a property.

These records include deeds, court records, property and name indexes, and many other documents.

The purpose of the search is to verify the seller's right to transfer ownership, and to discover any claims, defects and other rights or encumbrances on the property.

The Florida Department of Insurance regulates the rates that title insurers can charge consumers and the Florida Promulgated Rates for an owner's policy are as follows:

- $5.75 per $1,000 of value for the first $100,000.00.

- $5.00 per 1,000 of value thereafter for purchase prices up to $1,000,000.00

What is a Reissue Credit?

There are several ways to save money at closing, particularly discounted title insurance from the promulgated rate.

For instance, on the sale of a $300,000 house or condo, the promulgated rate for title insurance is $1,575.00.

If you qualify for any one of the below scenarios, you are entitled to a reissue credit, which will reduce the price of title insurance to $930.00.

That is a discount on title insurance of S645 or 41% ! A reissue credit can be obtaining one of the following 3 circumstances:

1. Title insurance policy that is less than three years old.

You will qualify for reissue rates on obtaining title insurance if your policy was issued with an effective date of less than three years after the effective date of the policy insuring the seller or mortgagor in the current transaction.

2. Refinancing.

Loan policies on refinancing of property insured by an original owner's policy, which insured the title of the current mortgagor. This means if you previously obtained an owner's policy and can produce a copy of the policy in advance of the refinance, you will be eligible for a reissue credit.

3. Raw land.

You are eligible if your policy covers real property, which is unimproved except for roads, bridges, drainage facilities and utilities, where the current owner's title has been insured prior to the application for a new policy.

To find out if you qualify for a reissue credit, call FLORIDA IS PARADISE at +1-800-239-0867.

How Your Home Can Be Under Attack - Title Insurance Overview

The title insurance industry has been protecting the American dream of homeownership for more than 125 years. Real estate property is the nation's largest asset, and the behind-the-scenes work of title companies ensures the quick and secure transfer of land, fostering lender and consumer confidence in their real estate investments.

The objective of title insurance remains the same as it has always been - helping the parties in real estate transactions to determine their rights and interests, and assuring that land transfer is expeditious and secure. Protecting the parties involved in real estate transactions is the reason the title insurance product was developed.

In the U.S., matters affecting ownership and other real estate interests are entered in public records. Before a transaction is completed, a title search of the records is made in an effort to locate potential problems so that they can be rectified and the transfer can proceed.

While most problems can be located in a title search by skilled professionals, there can be hidden hazards that even the most thorough search will not reveal. Examples include forgeries in the chain of title, a claim by a previously undisclosed relative of a former owner, or a mistake in the records. Liens, easements, rights-of-way, life estates, air and subsurface rights, and future interests are also found in a title search.

Title insurance is substantially different than other types of insurance coverage, which can often lead to a misunderstanding of the product. Title insurance emphasizes risk prevention rather than risk assumption. This emphasis on risk prevention is a labor intensive and costly component of doing business, but the coverage offers the best possible opportunity for avoiding claims and losses in real estate transactions.

During the title search, title companies find and fix problems with the title in 25 percent of transactions - usually unbeknownst to the consumer or lender. In addition, title companies pay millions of dollars each year in claims.

When a property is resold quickly, or refinanced within a short period of time from the original purchase or most recent refinance, a new title search and title policy are needed. The owner/seller may have created or experienced claims, liens or other encumbrances since the original policy was issued, and the lender will require a new title search to ensure that the title is clear. For instance, the owner may have taken out a second mortgage, incurred a mechanic's lien or a lien from unpaid taxes.

History of Title Insurance in the U.S.

Until the United States was nearly a century old, the conveyance of real property did not include any form of guarantee or insurance.

Many of the transactions were handled by "conveyances", who either personally searched titles or obtained some form of abstract (summary of public records) to determine ownership of the land and encumbrances on the title.

Before taking title to property, the buyer required that the title be free of any rights, interests, liens or encumbrances of others for which he or she would be responsible. Based on the title search or abstract, the title could be examined and an opinion rendered by the conveyance that the title was clear, and thus marketable.

There clearly were limits on the protection that the conveyance could provide to the parties involved. This inadequacy of safeguards was emphasized in a historic court decision in 1868 that led to the creation of title insurance - which brought a new dimension of security and stability to the real estate market.

In 1876, a group of Philadelphia conveyances founded the first title insurance company. In an initial advertisement, the company said it was beginning operation to insure "the purchasers of real estate and mortgages against losses from defective title, liens and encumbrances," and added, "through these facilities, transfer of real estate and real estate securities can be made more speedily and with greater security than heretofore."

Subsequently, title insurance companies were organized in other cities- among them, New York City, Chicago, Minneapolis, San Francisco and Los Angeles.

As the industry grew, title companies and their agents began providing essential services to real estate buyers, sellers, lenders, brokers, attorneys, developers, builders and others. Following World War II, returning serviceman began to buy homes in large numbers; the title industry began to change from an essentially local enterprise to business on a national level. Yet, despite this national lending/investment environment and the advent of a national secondary mortgage market, title work continues to be based on local law and custom.

With the advent of new types of mortgages and the rapid growth of an aggressive secondary mortgage market, title insurance companies have responded to investor needs by creating new policies offering innovative coverages. Title agents in some locations have seen their functions evolve into much more than just title searching.

Today, many are involved in completing all aspects of the closing process, from preparation of documents and recording instruments, to preparation of closing forms and collecting and disbursing funds.

The title insurance industry continues to provide security to real estate investors, especially as rapid and dramatic developments drive the real estate market. From a single-family home purchase to a multi-million dollar commercial transaction, real estate investors in the U.S. will continue to receive title protection at a level of excellence, unequalled anywhere in the world.

However, with that being said, it is always suggested that if you are the buyer, you should have a lawyer review the title work to confirm its accuracy (as it is often prepared by the Seller's representatives) and to limit any exclusions from the title policy, as such exclusion can reduce the title insurance coverage.

For any questions, contact FLORIDA IS PARADISE at +1-800-239-0867.

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Silver International Realty

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