Part 4 – Title Insurance
Buying a home is one of the most important decisions in a person’s life. As we discussed last week, in Part 3 of our Beginner’s Guide to Buying a Home in Florida, Inspections, even for the most experienced sellers/buyers, closing on a home in Florida can become an intimidating challenge. This series is written to assist you in understanding the basics of real estate transactions in Florida.
It is now customary, when buying a home, for the title to real property to be insured in order to protect the buyer from any prior mortgages, liens or claims by third parties that they have an interest in the property under contract. The contract has a provision for title insurance and give an option to determine which party will bear the cost. After the contract is signed by all parties, a title insurance commitment will be ordered by the party responsible to pay for the policy or his/her attorney. The title commitment will be prepared by a title insurance company, such as Chicago Title Insurance, and the commitment will show all of the requirements to close on the sale, as well as the exceptions to the title, such as easements for utilities and drainage. It is critical for the buyer or his/her attorney to review the commitment as soon as it is received to determine if there are any major issues (“title defects”) and/or requirements to be cured in order to obtain clear title to the property. If there are issues to be resolved, the buyer must give the seller written notice, setting forth each issue, and the seller is responsible to “cure” the title by resolving those issues. If the buyer fails to review and notify the seller of the issues within the deadline (which is usually five days after buyer receives the commitment), the only options left to the buyer are to take title to the property subject to the title defect or to default on the contract, lose the deposit or be subject to a lawsuit. If the buyer notifies the seller of title defects, the seller will have a time deadline to cure those defects, failing which, the buyer can opt to cancel the contract and receive a refund of the deposit or proceed to closing and take title subject to the uncured defect. If the contract proceeds to closing, the closing agent will be required to meet every requirement listed in the commitment at or before the closing.
There is title insurance available for buyers (an Owner’s Policy) and lenders (a Lender’s Policy). The Owner’s Policy is optional, but, for many home buyers, purchasing an owner’s title insurance policy is a matter of being safe rather than sorry. Virtually every institutional lender will require the buyer to provide and pay for a lender’s title insurance policy at the closing. The amount of the insurance coverage for the Owner’s Policy will typically be the purchase price in the contract, and the coverage for a lender’s policy will be the amount of funds loaned to the buyer by the lender. If a party challenges your title at any time after the closing, while you are the record title owner, the title insurance underwriter will defend your title against the claim and pay any and all related loss, up to the limits of the amount of insurance in the policy. The lender’s policy indemnifies the lender’s interest in the title to your property, and the underwriter will pay for the defense in any lawsuit and pay for any damages to the lender, due to a title defect, up to the amount of the original loan value.
No matter if you’re buying or selling a home in Florida, you should have a skilled representative working with you throughout the process. While an agent or realtor can answer certain questions you may have, only an attorney will act in your best interests and is often less expensive than people think. In fact, in most instances having a real estate lawyer close your transaction will cost no more than a title company will charge to conduct the closing. That is why we invite you to contact the Sherrard Law Group today to speak to a member of our legal team about your real estate transaction. We look forward to serving as your trusted legal representatives.
Next week – Part 5…Processing the Contract for Closing and Preparation of Closing Documents