When you buy a piece of land, you don't get handed the piece of land -- you are given title. Title is the owner's right to possess and use the property. How a home is titled can vary. For example, title might be held as tenants in common, as joint tenants, there may be a right of survivorship, or there might be a life estate in the home.
In addition, as you might imagine, there are many uses for land and rights can be given or sold for such uses. Someone other than the person you think of as owner of the property itself may own mineral, air, or utility rights on the property. A bank with a mortgage on the property owns an interest in the property, as does someone who has done work on the house and filed a lien against it. The government may also have liens against the property for unpaid taxes, and the city may have an easement giving it the right to string utility lines across the front yard.
A title search will reveal many of these potential problems. A title search is done by examining public records to look up the history of property ownership. The title search shows not only limitations on the use of the property and rights others may have in the property, but also liens or monetary obligations that are outstanding against the property. Once you know whether there are limitations on the use of the property or liens against the title, you may wonder why you cannot just deal with those issue before you purchase the property? Why would you need insurance once you know about all the problems? Isn't it like buying fire insurance after your house has burned down? In fact, buying title insurance is a little like buying fire insurance on your burned down house.
Title insurance covers events relating to the title that have already happened. It does not cover anything that happens to the title after the date of issuance. If you have liens filed against the property for taxes that you didn't get around to paying, your title insurance policy is not going to help you. But, if the lien is for taxes not paid by someone who owned the house 80 years ago, then you may have coverage under your title policy. Problems such as deeds, wills, and/or trusts that contain improper vesting and incorrect names, outstanding mortgages, judgements, and tax liens, easements, or incorrect notary acknowledgments are generally found through the title search and usually can be cleared up before the closing on the property. When these problems are not cleared they will often be listed as exceptions to the policy's coverage. You would then need to decide whether the property is still something you want to purchase given the known problems with the title.
There can many problems with a title that even a diligent and trained eye may not uncover during a title search. At SETCO, we believe your home purchase should come with peace of mind. That’s why we use Fidelity underwriters to search your title’s history and ensure you have a “clean” title record. Title insurance protects you from many things. Our Team is here to give you the service you want, not just the ones you need.