Title Insurance
Title insurance assures owners that they are acquiring clear title to the home. In California, most real estate transactions are closed with a title insurance policy. The seller pays a one-time premium, based on the sales price of the property, that will insure that the seller has the right to sell the property.
When a title company receives an application for title insurance, their initial area of responsibility is to abstract the public land records in order to examine information surrounding the title to the property being purchased. This title investigation or search is referred to as the "Chain of Title".
The "Chain of Title" will reveal the following:
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That the contract seller of the property is, in fact, the legal owner and that all owners are parties to the contract.
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That the estate or degree of title which you have agreed to purchase is currently and accurately vested in the seller.
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The presence of open mortgages judgments or similar liens which must be satisfied before a clear title can be conveyed to you.
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Existing restrictions, easements, or rights of way for roads, public utilities, etc., which may limit your right to the use of the property, or grant rights to others who are not owners.
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The status of property taxes and other public or private assessments.
Once this investigation or title search is complete, the information is supplied to you and your lender in the form of a commitment for title insurance.
During the final settlement or closing stage of your purchase, the title company will work very closely with your lender. After closing, the Owner's Title Insurance Policy is issued and will protect you against hidden title defects such as fraud, forgery, incompetence or similar matters which are not revealed by the public records.
In addition to the owner's policy, there is a lender's policy which insures that the buyer is the owner of record. The buyer will pay a title insurance premium for the lender's policy which is calculated on the loan amount. The lender's policy of title insurance insures the lender that their lien has priority over other liens not shown in the policy.