FTHer Series - 1. Title is your Private Detective
 
You search for people on the internet, you hire a private detective to snoop -shouldn't you do the same for a new home? You need someone to dig around on your home's history and its past owners to ensure your ownership of the home. Luckily, you've got a title company to do the digging for you.

A title company is called in during escrow to run a detailed search on your home and it's past owners to order a policy and have you 'take title'. The title company orders a title search on your new home looking for any recorded debt against the property such as unpaid property taxes or loans. As well as property line problems, easements, mechanic's liens, tax liens,etcetera. If a title search is not run on your home the following could happen: loss of money from having to pay for corrections from past owner's or clerical mistakes, unexpected events such as a power line being built on your property due to an easement you were unaware of, or you could lose your home.

-An easement is a right of way afforded to a person or government to make limited use of someone else's property. (Example: A ditch for the community running through your backyard)
-A mechanics lien is a recorded notice against a property when workmen have been unpaid by the owners. (Example: When you contract someone to build a fence for you and you fail to pay them.)
-A lien is a recorded notice against a property for money, either voluntary or involuntary. (Example: A loan for your home)
 
There are two types of title policies purchased in escrow - the new owner's policy and the lender's policy. The seller typically pays for the new owner's policy and you, the buyer, pays for the lender's policy. The policies last for as long as you own the home. Why two policies? Each person needs to cover their butt - you, the buyer, needs to protect your ownership and the lender needs coverage because they've taken out a lien (the loan) on your home.
 
By purchasing title insurance you ensure your ownership is free and clear of any claims against the property. If something does come up after you've purchased the home that's when title insurance comes in. They'll pay to help clear whatever issues comes up on the house. Here's an example: If the previous buyer has a lien on the property but it was recorded after the sale,
title insurance will pay off that lien and go after the seller, you won't be responsible.
 
Many people don't know title search also includes running the previous homeowners background to make sure they don't have outstanding debts, such as unpaid child support. If the homeowner does owe money, it needs to be paid off before the house is sold, usually by title.
 
Don't fret, problems with title are infrequent. If an issue does arise on the property, title takes care of it. And any liens found during escrow will be paid off by title.
 
Now to the important question, what's it going to cost me? New owner's policy is determined by the purchase price. Lenders policies are about half the cost of the new owners policies and they're computed by using a complicated formula - no need to delve into. Here's an example: If you purchase a home for $300K the new homeowner's policy will be around $1,200 and that's paid by the seller. You'll be paying the lender's policy and it would be around $519 if assuming you have a 100% loan. Luckily, title insurance is a one time fee.

I would like to give a very special thanks to: Cindy Farnsworth with Landwood Title for her help.