***Tayson is not a Title expert! Always consult with your Title Company, or attorney when reviewing an actual policy, or Commitment for Title Insurance.
Simplified, Title Insurance is basically a form of insurance which insures (a buyer) against Financial loss from defects in the chain of title for real property.
Usually we see two types. What is called an Owner’s Policy, and a Lender’s Policy or Mortgagee Policy.
The Owner’s Policy is basically what is described above. It helps ensure the property gets properly vested with the purchaser, that it is free of liens and encumbrances, and usually covers losses and damages suffered in the event the title it is deemed unmarketable or there is no access, usually for the amount of the purchase price.
The Lender’s Policy, sometimes referred to as the Mortgagee Policy is typically only issued to lenders. The policy benefits whomever holds the mortgage loan. These policies cover the lender for losses regarding some of the same issues set forth in the owners policy including access, but also the lien created by the mortgage to ensure that it remains enforceable. Your lender usually requires that you hold homeowners insurance to protect their interest in the event that home is damaged, and the same goes for title. They usually require that you have a lender’s policy to protect their interest with regards to the lien created by the mortgage and that the property continues to remain marketable.
Who Pays for these Policies?
In Teton County, it is fairly customary that the seller will pay for the Owner’s Policy, and that the buyer will pay for the Lender’s Policy if they are obtaining a loan. This is not always the case, buyers have been known to pay for the Owner’s Policy, and sellers have been known to pay all of the buyers closing costs which usually includes the cost of the Lender’s Policy. There are also extended policies available, I will go over and another post.
With the above said, it is important to remember that there are requirements that need to be met in order for these policies to be issued, and there are exceptions of which the title company does not insure. These are usually set forth in what is called a Title Commitment, which you have probably seen if you have purchased property in Teton Valley.
The Requirements section lists what things must be done before escrow can close and title insurance will be issued. If a requirement can not be met, close of escrow may be prevented or delayed. The Title Company will normally help make sure that these requirements are met prior to closing.
The Exceptions section discloses the exceptions that the Title Company will not cover against. It also generally includes certain standard exceptions such as mineral and water rights. The Title Insurance Policy will not insure against loss, nor will the title insurer pay costs, attorney fees, or expenses, resulting from title problems listed in this exceptions section, so it is important to review these in your Commitment for Title Insurance, before the actual policy is issued at close of escrow.