Frequently Asked Questions
What is title insurance?
Title insurance protects the insured from claims against real property arising from title-related defects. Unlike other kinds of insurance that protect against losses from future events, title insurance affords protection from past events that may or may not be part of the public records but that can adversely affect an owner’s interest in the real estate. Title insurance protects against matters of public record along with hidden title defects, such as fraud, forgery, incompetency or missing heirs, that even the most diligent title search may not discover. In most instances, a lender requires a borrower to secure a title insurance policy to cover the lender’s interests. For a small additional premium, the borrower can take an owner's title insurance policy to protect their own investment in the property.
Why does the buyer need title insurance?
Without title insurance, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records, or mistakes in examination of the title of your new property. As a result, you may be held fully accountable for any prior liens, judgments, or claims brought against your new property. However, your policy insures that if such an occasion arises, you will be defended free of charge against all covered claims and paid up to the amount of the policy to settle valid claims. Backed by our underwriter’s vast resources and financial strength, you will not need to worry that your new property’s history will tarnish your bright future.
What specifically does title insurance protect against?
- Liens from unpaid estate, inheritance, income, and gift taxes
- Defective acknowledgment due to lack of authority of notary (acknowledgement taken before commission or after expiration of commission)
- Descriptions apparently but not actually adequate
- Mistake in recording legal documents (eg, incorrect indexing or errors and omissions in transcribing and failure to preserve original instruments)
- Special assessments where they became lien upon passage of resolution and before recordation or commencement of improvements for which assessed
- Recorded easement but erroneous ancient location of pipe or sewer line that does not follow route of granted easement
- Undisclosed divorce or spouse who conveys as sole heir of deceased consort
- Deed from record owner of land where he has sold property to another purchaser on unrecorded land contract and the purchaser has taken possession of premises
- Tax titles that are invalid because of irregularity of proceeding, reversal of court decisions, or lack of decisions on points of law
- Fraud, duress, or coercion in securing essential signatures
- Deeds by persons of unsound mind
- Invalid, suppressed, undisclosed, and erroneous interpretation of wills
What exactly does National Capital Title & Escrow do?
Our job is to take a confusing, frustrating, and complicated process and make it easy. To do this we rely on our knowledge of real property laws and our experience working with lenders and the applicable county and state recording and tax offices. Additionally, we gather all of the specific information necessary from the parties to the transaction, including the buyer, seller, lender, and real estate agents.
First, we search the land records, prepare a title report, order a survey (if a single-family house), and gather a certificate of insurance and payoff letter for the seller’s loan (if any). We then examine this information to confirm that the buyer is buying the property with out any clouds to the title of the property and insure the buyer’s new title to the property. The information gathered is often incomplete or inconsistent due to land records and other data that are often out of date, further underscoring the need for owner’s title insurance that protects the buyer’s title to the property. Buyers review our draft of the settlement statement (HUD-1), which is provided at least 48 hours before settlement, and obtain a certified check from their bank payable to “National Capital Title & Escrow, llc” for the exact amount needed to close the purchase. The HUD-1 will adjust to the date of closing the real estate taxes, condominium assessments, rents, and security deposits (if any) between the parties.
At the settlement table, in addition to executing the loan documents, we collect the buyer’s check; prepare, have signed, and transfer the deed and related affidavits from the seller to the buyer; and pay all taxes, liens, recording fees, and other charges due. After settlement, we record the buyer’s new deed. We then release the balance of the seller’s proceeds to the buyer and issue the owner’s and lender’s title insurance policies.
When the closing is completed, the file goes to the postclosing department. We prepare the recording package and send it to the Land Records Office for recording. Most files are recorded without trouble, but occasionally recordings are rejected and need to be corrected and resubmitted.
After the recording process is complete, the original deed and deed of trust are returned to us, and the original deed is sent to the new homeowner and original deed of trust to the lending bank (depending on the jurisdiction, this could take up to six months). We are also responsible for paying off the existing mortgages and/or judgments on the property, obtaining releases for the liens associated with those mortgages and/or judgments, and recording said releases in the Land Records Office. Since the purchaser has obtained a title insurance policy, the purchase is protected whether or not those liens are properly released, but since the title company has issued the insurance and provided a commitment to the bank that those liens will be released, the title company is responsible for making sure that they are in fact released.
It is our job to obtain and pay the final water bill. This is the title company’s responsibility since an unpaid water bill creates a lien on the property. Also, any homeowner’s association or condominium dues collected at settlement are submitted to the homeowner’s association or condominium association, along with a copy of the HUD-1
We also maintain and disburse repair escrows, maintain and disburse postsettlement occupancy security deposits, return signed original documents to the lender, and answer and resolve all potential postclosing issues or questions.
Who decides which closing agent or attorney handles the closing?
By custom and law, it is your choice to select the closing/settlement agent if you are refinancing or purchasing the property.
What’s the difference between a lender’s policy and an owner’s policy?
Your lender will require title insurance; however, the lender’s title policy insures the lender’s interest in the collateral for the loan (the home) against loss due to the title defects that were not discovered at the time of the sale. It offers no protection for the homeowner. An owner’s title insurance policy protects the buyer’s equity against title defect up to the amount of the policy or purchase price (an enhanced policy protects up to 125% of the purchase price), not just to the amount of the mortgage.
Is title insurance required for a refinance?
When refinancing you take on a new loan. The new lender will most likely require a lender’s title insurance policy to protect their investment in the property. Remember, if it has been less than 10 years since you bought your house, please ask if you qualify for a reissue credit.
If I am buying a newly constructed home, do I need title insurance?
When buying a home that is newly constructed, one may think that no one has owned it before. There may have been other owners, but only on the unimproved land. It is important to conduct a title search to make sure there are no uncovered liens. Your lender will also require a lender’s title insurance policy, and it is in your best interest to obtain an owner’s title insurance policy.
How can there be a defect to title? Isn’t the title checked carefully before closing?
A title exam, an in depth investigation of the property including rightful owners, liens, easements, and restrictions, is completed before closing but it is not foolproof. For example, one of the previous owners could have been married and potentially his or her spouse (who has an interest in the property based on the marriage) did not sign the deed when the property was transferred three owners back. It may be difficult to detect this within the confines of a standard title exam. The previous owner’s spouse technically still has an interest in the property and could attempt to claim it from you at any time. A title insurance policy will provide for payment of this claim if it is legitimate.
What is a survey?
A survey is required when purchasing a property and is the only way to obtain and confirm basic information about the property. The survey normally required is an engineer’s drawing and not a full stake survey. The engineer’s drawing will confirm the location and existence of the property and its relationship to adjoining property, reflect discrepancies between actual occupation or use and the recorded description, show the location of improvements in relationship to boundary lines, and disclose if the property violates zoning ordinances. This information is paramount to your purchase of the property. A survey is not applicable to condominiums or cooperatives.