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Estate Resources
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Courtesy
of:
O'Donnell,
Lee, McCowan & Phillips, LLC
Attorneys at Law
112 Silver Street
POB 559
Waterville, ME 04903
(207)872-0112
 |
The Value of Owner's Title Insurance
"An Ounce of Prevention Is Worth A Pound of Cure"
- Benjamin Franklin
Title insurance protects you against challenges
to your legal title to your property. It guards against claims
from your geographical neighbors, and claims based upon defects
in your chain of title. Title insurance can also protect you
against liens, undischarged mortgages,
undiscovered easements, and many other problems that can result
in loss of your property or a substantial loss of value. It
protects you against many matters that cannot be detected
in even the most careful title search. Perhaps most importantly,
an Owner's Title Insurance Policy covers you when there is
actually nothing wrong with your title, but someone else thinks
otherwise and will not be convinced without litigation to
demonstrate that you are correct.
An Owner's Policy either pays for an attorney hired by the
company to defend you against the challenge, or if the challenger's claim
is enforceable, you will be compensated for the fair market value of your
property. In the case of liens, easements, or other blemishes on title, you
may be paid for the resulting dimunition in value
of your land. As a practical matter, many property disputes settle short of
a full-blown trial. The financial resources of the title insurance company
can help make it possible to settle the claim financially, or to implement
a practical solution like construction of an alternate driveway or moving a
fence or wall.
An Owner's Policy protects you for the entire time you own
your property and even thereafter. If you later sell your land via a
Warranty Deed (the most common form of conveyance), you make a promise to
all future owners that the title to the property is good. Technically, a
subsequent owner could sue you for defective title. Title insurance
continues to protect you against such claims even years after you have sold
the property.
Do not confuse Owner's Title Insurance with Lender's Title
Insurance. If you are getting a loan, it is likely that a Lender's Title
Insurance Policy will be included as part of your closing costs. That
policy does not give you, the Owner, any protection at all. It only insures
the bank's mortgage interest against title problems. In a worst case
scenario, resulting in total loss of the property, the bank's mortgage may
be paid off by the title insurance company, but you would have no attorney
to defend you and no compensation for the loss of your home or land. Many
people mistakenly believe they purchased a policy in the past, but upon
further investigation discover that what they remember was the premium for
the Lender's Policy. To have protection for yourself, you must purchase the
Owner's Policy counterpart to the Lender's Policy, issued at the same time.
You may have to purchase a new Lender's Policy each time
you refinance in the future, because a Lender's Policy is specific to a
particular mortgage. But you don't have to purchase a new Owner's Policy.
It continues in force through any number of refinancings.
At purchase or refinance are the best times to buy a title
insurance policy, because you have already paid for a title search. A title
search is mandatory to be able to get a title insurance policy. If too much
time lapses between the search and a request for a policy, a new search has
to be done, with a new title search charge to you.
The premium you pay for an Owner's Policy is a
one-time premium, not a monthly or annual charge. In considering
the value of a policy, you should be aware that in Maine many
attorneys charge $150 to $250 per hour for investigation, negotiation,
and litigation work in land disputes. Attorney and surveyor
fees can easily run into the tens of thousands of dollars. Real
estate title disputes frequently take two years or more to resolve
if not settled.
Given these considerations, and our own experiences, we
recommend that all buyers and owners of land in Maine be protected by a
title insurance policy. We consider the cost to be reasonable for the
magnitude of harm that can be avoided. We must note that the title attorney
or title company issuing the policy retains most of the premium paid, with
a minority percentage remitted to the insurance company's headquarters.
Thus, for the most objective opinion on the topic, you should consult an
experienced real estate lawyer who is not also the issuing agent. That
being said, we recommend investing in a policy even in transactions where
we are not the issuing agent.
Finally, if you do purchase an Owner's Policy, it is important to remember
that you have it. More than once, people have come to our firm for help
with a title dispute, forgetting that they have a policy. Before they start
paying us the hourly cost of investigation and litigation work, we ask them
if they have a policy. We check title company databases to see if a policy
was issued. If so, the claim is submitted to the title insurance company
for evaluation instead, saving the Owners thousands of dollars. Thus, if
you have a policy, keep it in a safe and memorable place, with other
important papers.
More Information About Title Insurance:
Title
Insurance Is Essential In Protecting Your Investment, Nov.
2010, in The Washington Post
Why
You Need Title Insurance by American Land Title Association
Information
about Title Services and Insurance by U.S. Dept. of Housing & Urban
Development (HUD)
We hope this information has been helpful. If you have further questions,
please be sure to speak to your lawyer and/or your realtor about this
important issue. If we are handling your closing, please give us a call at
(207)872-0112.
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