The role of the title insurance company is one of the main element in all commercial real estate transactions. If it weren’t for title policy coverage, business owners would find buying and selling of real estate to be too risky. A good understanding of title agents and its job in commercial real estate transactions is crucial as an entrepreneur. You will be better at finding great deals and protecting your investments.
What is Title Insurance?
It is a unique type of insurance that protects property buyers from any issues with the title from previous transactions. The title policy is essential in both commercial and residential real estate sales. Since the cost is bigger and the transaction is more complicated in business transaction compared to residential, title insurance is more important in commercial real estate than residential. The risk is significantly bigger, so insurance coverage is more vital to mitigate the risk.
What is the coverage of Title Policy
Having a title means the state allows you to own a piece of real estate. A deed of sale shows the transfer of title between the seller to the buyer. However, not all deeds will transfer the full ownership of the real estate because there are situations where the property may be under encumbrances such as liens that will limit ownership.
A real estate buyer will acquire title insurance to make sure that the title of the property that they are looking to buy don’t have any hidden issues that the seller might not even know. Although a seller honestly believes that there is no problem with the title, there could still be some unexpected claimants to that title such as an heir to the title. In such case where there is another rightful owner of the property, the buyer will still be protected by the real estate title companies.
Insurance companies have different policies. However, the coverage includes the fees for the legal battle for the title and reimbursement to the buyer in case the third party claimant will win.
The responsibilities of a title company
An essential service provided by title companies is that they will research your title before they issue a policy. The title search includes a thorough examination of all the records of property transfers for the real estate that will be purchased. Some records that they search dates back decades or even a century ago. If the insurance company
believes that the title is clean, it will issue a policy. If their research found out that the title might have a hidden defect, they will let you know, thereby giving you a warning not to buy the property.
Aside from the transfer of ownership, the search will also check other encumbrances such as liens and easements made against the property. All records are meticulously checked, and all efforts are exhausted to make sure that the results of each lien and transfer are uncovered. After considering their efforts, real estate attorney cost is all worth it.
After the title search, the company will issue a report to the seller and buyer for them to examine before the company issues a title policy.
Various Types of Endorsements and Policies
Title companies generally offer two main types of policies. The lender’s policy for the mortgage companies and the owner’s policy for the homeowner. The bank or any lending company require this type of title insurance. It is designed to protect the investment of the mortgage company in case there will be a problem later on. The owner’s policy is for the owner or buyer of the real estate from the past defects that might be discovered in the future.
Aside from insurance from title issues, insurance companies also offer different types of endorsements. They will cover different issue such as zoning conflicts, environmental issues, boundary mistakes, etc. The cost depends on several factors such as the risk and value of the property.
There is a number of title insurance companies all over the US. Both parties must agree on the title company to use since most of the time; the insurance company also serve as an escrow agent in real estate transaction.