The evolution of reliable, modern title insurance services.
Title insurance protects its insureds against loss or compensation in the event an actual loss occurs. But at one time in our history, this level of protection didn’t exist.
Identifying the need for better protection.
Prior to its creation, purchasing property in the early to mid-1800s fell along the lines of a “buyer beware” proposition. This means you paid your money and crossed your fingers hoping you would receive what the seller originally promised to give you without any repercussions. In this scenario, a lawyer likely reviewed an abstract of title, and you had to rely on his or her opinion upon whether or not it was wise to invest.
Things changed in 1868. The Pennsylvania Supreme Court heard a case where a buyer lost his investment after relying on the seller who failed to disclose a known lien. The buyer decided to invest after his lawyer stated the lien was not valid (even though it was). The court ruled in favor of the seller claiming he should not be held responsible for his lawyer’s opinion. This triggered the Pennsylvania legislature to subsequently pass an act to start incorporating title insurance companies.
The advantages of today’s title insurance companies.
Title insurance companies typically issue Owner’s and/or Lender’s policies. The Owner’s policy ensures a buyer that he or she will possess a marketable title once certain requirements are met (known as Schedule B-1) and subject to certain known encumbrances (Schedule B-2). When owners sell their property, they will gain confidence knowing they have something of value worth selling.
The Lender’s policy insures a mortgage holder of the priority of their lien in case foreclosure is inevitable. This allows willing lenders to provide funds for the buyer to make a purchase. They know if their borrower does not pay, they will be in a position to still recoup their investment through foreclosure.
In every county or parish in the United States, you’ll find a ‘Clerk and Recorder’ office holding records of all documents encapsulating real estate countywide. A title company searches through these records to determine the status of title, along with any documents affecting or limiting its use in any fashion. Along with the Tax records of the County Treasurer, the title company uses these records to create a ”Title Commitment” promising to insure the property once all conditions of closing are fully met.
In a nutshell, the title policy to your new home gives you comfort in that the money you (and your lender) paid for the property is protected. You gain further assurance knowing that should you wish to sell your property later on, you have the full ability and right to do so.
After all, it is your home. It should be your decision to do it your way.