Title Insurance Consumer’s Guide

Prepared by

Commonwealth of Virginia State Corporation Commission Bureau of Insurance P.O. Box 1157 Richmond, Virginia 23218 (804) 371-9185 (877) 310-6560

Website: scc.virginia.gov/pages/Insurance E-Mail: [email protected] What is Title? What is a Title Search? Title is a term that encompasses a bundle of rights A title search is conducted by in real property. This bundle of rights governs an in - a title company, title agency, dividual’s legal right to own, possess, use, title abstractor, or attorney control, and dispose of real property (land and the who performs a detailed in - improvements on it). Buyers of real property should spection of the historical have a title search performed to determine if they public records concerning are receiving all of the ownership rights to the prop - the property. These records erty they are buying. The title search of the public are commonly referred to as records will reveal matters which affect the title, “the land records.” Title searches are performed to both beneficial and burdensome. locate matters that affect and pertain to the prop - erty, such as the chain of title, defects, liens, en - What is Title Insurance? cumbrances, real property taxes, and mortgage Title insurance is a contractual obligation between liens. The title search includes information on you (and/or your lender) and the title insurance whether the seller has the title to the real property company. In exchange for a one-time premium pay - being transferred, and if not, what matters affect ment, the title insurance company provides his title. protection against future losses that might result from a variety of possible title defects, liens, or en - Who is Protected by Title Insurance? cumbrances. Coverage becomes effective as of the A buyer or a lender may be protected by a title in - date your real property transfer is recorded in the surance policy. A buyer may purchase an owner’s local land records. title insurance policy and will be the named insured on that policy. The buyer’s lender will require a loan What is a Title Defect? policy, and that lender will be the named insured on A title defect is a problem or omission associated the loan policy. with the title that impairs your ownership rights to The owner’s policy protects you, the homeowner, the property. Possible title defects include, but are against the specific types of claims listed in the pol - not limited to: (1) judgments, (2) liens, (3) unpaid icy. The owner’s policy remains in effect as long as real property taxes, (4) outstanding interests in the you or your heirs have an ownership in the prop - title, (5) fraud or forgery in prior conveyances of the erty. The policy cannot be transferred to the new title or powers of attorney, (6) problems with minors owner if you sell the property. There is a one-time and mental incompetence that were unknown to premium which is payable at closing. If the home - you at the time you purchased the property. owner chooses to buy an owner’s policy, he is re - quired to purchase coverage for the full value of the property, which is typically the sales price.

The lender’s policy protects the lender’s security in - terest (the mortgage) by indemnifying the lender for losses in the event that the mortgage is not enforce - able or does not have the priority over other mat - ters of title as insured in the policy. The lender’s policy coverage amount is based on the amount of the initial mortgage and decreases over the life of the loan as the balance decreases. The lender’s cov - erage terminates when you pay off the mortgage in full. If you refinance your mortgage, the new lender will require a new lender’s policy. If you purchased an owner’s policy on this property, check with your title insurance company to determine if you need a Who Chooses the Title Insurance Company? new owner’s policy or an endorsement to your ex- You do. However, the per- isting owner’s policy. son you choose to conduct your closing may only What is Covered? have a contractual rela- tionship and appointment Title insurance protects you and/or your lender with one or more title against losses resulting from claims against your companies so inquire as to ownership of your property. It is different from which title companies they represent. other property insurance coverages because title in- surance provides coverage for problems or “hidden risks” that have occurred before you took title to Title Insurance Shopping Tips the property, yet the problems or hidden risks affect • Buyers should insure for the full purchase your ownership rights. price of the property; the lender needs a policy only for the amount of the loan. Title insurance coverage includes: • Local practice, not the law, determines who • Protection from financial loss due to covered pays the premium. This can be a negotiation claims against your title, up to the face amount point between the seller and the buyer. Your of the policy. real estate agent or settlement agent can advise you. • Payment of your legal expenses if the title insur- ance company is required to defend your title • Verify that the policy describes all of the prop- against covered claims. erty and all of the interests you are acquiring in the transaction. Title insurance does not cover losses listed under your policy’s exclusions and exceptions. Be sure to • Ask about all rate or premium discounts that discuss these exclusions and exceptions with your may be available. settlement agent or attorney before your closing. • Shop around. Talk to your settlement agent or attorney about title insurance before the settle- Who Sets the Rates for Title Insurance? ment date so you will have time to find a com- Title insurance companies establish their own rates petitive rate. and can negotiate the rate with any potential in- sured. You should shop around to determine which • Read the policy. Know exactly what your policy company has the most competitive rates. In order does and does not cover. to make a true cost comparison, you may wish to inquire as to charges for other associated services, • Be sure you are dealing with licensed title such as the title search, the title examination, title insurance agents and title insurance commitment preparation, settlement fees, release companies. You can search for insurance fees, notary fees, courier fees, and document companies on the Bureau’s web site at sc You can search preparation fees. You may be entitled to a dis- c.virginia.gov/pages/Insurance. for insurance agents and agencies at count, called a “reissue credit,” on your title insur- or you can ance premium if you are refinancing and have scc.virginia.gov/pages/Consumers call the Bureau’s Consumer Services Section at previously purchased an owner’s title insurance 1-877-310-6560. policy. On a new purchase, you may also be enti- tled to a reissue credit if your seller purchased an owner’s title insurance policy, no matter what com- pany issued the prior policy. The seller may have to produce the policy so that the credit may be ac- curately calculated by your title agent. Commonwealth of Virginia State Corporation Commission Bureau of Insurance P.O. Box 1157 Richmond, Virginia 23218

(804) 371-9185 (877) 310-6560

Website: scc.virginia.gov/pages/Insurance

E-Mail: [email protected]

2020