The titleThe right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of land…. of a property is evidence the owner is in lawful possession of that property. It is a legal document filed in the county of the property.
Title insurance protects against loss from encumbrances in the title of a property. Generally, called a “defect”. A defect is an all-encompassing term used to say there is something wrong with the title. A defect may interfere with the transfer and issuance of title insuranceInsurance that protects lenders and homeowners against legal problems with the title….. A defect can be a claim of ownership, fraud, forgery, lienA claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments…., encroachmentThe intrusion onto another’s property without right or permission…., or easementA right to the use of, or access to, land owned by another.. It is any document recorded establishing a claim. The title policy ensures a new owner against all claims made before the new ownership. A lender’s policy ensures the lender’s securityThe property that will be given or pledged as collateral for a loan…. interestThe cost you pay to borrow money. It is the payment you make to a lender for the money it has loaned to you. Interest is usually expressed as a percentage of the amount borrowed…..
When someone says there is a “cloud on the title” they mean a defect exists that can prevent transfer to a new owner. For example, a seller is in a contract and they are contesting the release of earnest money. Title insurance is not issued to another buyer until that contract terminates.
Here is an example of a claim. You purchased your dream home, moved in, and make your mortgageA loan using your home as collateral. In some states, the term mortgage is also used to describe the document you sign (to grant the lender a lien on your home). It also may be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage often is the purchase price… payments. You get a notice from a company saying they have a lien on your house that is in defaultFailure to fulfill a legal obligation. A default includes failure to pay on a financial obligation, but also may be a failure to perform some action or service that is non-monetary. For example, when leasing a car, the lessee is usually required to properly maintain the car…. and demand you pay it. This is ridiculous and how could this be? If a valid lien, it’s a claim on the property until paid. You don’t ignore it. You make a claim on your title insurance from when you purchased your home. If ignored, you might get a notice of foreclosureA legal action that ends all ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage…. on your property. You might lose your dream home if not resolved.
Notify the title company to investigate the matter. If a valid lien, they will get a release at their cost. At the time of purchase, a job of the title company is to search for liens and defects making sure they get cleared. Any not found, the title policy protects you against any loses. All buyers should get a binding legal title clear of unknown defects at closingThe process of completing a financial transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property. In some jurisdictions, closing is referred to as “escrow,” a process by which a buyer and seller deliver legal documents to a third party who completes the transaction in accordance with their instructions. See…. If for some reason they don’t, that is why title companies and title insurance exist.