Real estate transactions are among the most complex and least well-understood transactions most individuals undertake! Promissory notes, deeds and deeds of trust, sales contracts and mortgage applications, home inspections and property appraisals all play important roles in the sale and purchase of real property. To best protect the interests of buyers and sellers, of lenders and creditors, of taxing authorities and vendors, the title company serves as the trusted agent responsible for ensuring the integrity of the property’s title as well as receiving and disbursing all funds related to the transaction. Title companies are required to be licensed by the state they operate in and must maintain professional liability insurance as well as fidelity and surety bonds. The title company is the guardian of the settlement process, bound to a fiduciary duty of the finest measure.
The modern mortgage marketplace is dependent on insurance providers willing to indemnify lenders in the event of a title failure. Without this third-party assurance, lenders would be forced to charge substantially higher interest rates to borrowers to compensate for the increased risk. Transferring this risk to a title insurer allows lenders to offer a higher volume of mortgages at lower interest rates and facilitates liquidity in the secondary market which also helps keep rates lower for consumers. While the requirement to purchase lender’s coverage is primarily intended to protect the lender, it is definitely in the borrower’s economic interest to purchase lender’s title insurance at a small fraction of the cost that would be paid in higher interest rates for the life of the mortgage!
Most definitely! Title insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.
Real estate settlements require several parties to come together at once to achieve the desired outcome. There are numerous milestones in the process that must be reached and all of them are sequentially dependent; that is, one is required to be achieved to undertake the next. The title insurer, the lender, the broker (if applicable), the buyer and the seller (and their agents) all have roles to play. The title company is conductor of this symphony; responsible for creating the pleasing music that is a well-conducted settlement.
If you have specific questions about your own unique situation, do not hesitate to contact us. We will gladly assist you in any way possible.