Title insurance
companies look at the history of the ownership of the property
in order to determine that the seller has legal ownership and
the ability to convey clear title to a buyer. This type of insurance,
called an Owners' Policy, is issued for a purchase transaction
and protects both the buyer and the lender. This is generally
the most expensive title policy since it protects against many
more risks.
Title insurance
for a refinance protects the lender only and is much less expensive.
The title company makes sure that the person who is borrowing
the money is legally allowed to encumber the property and that
the lender knows exactly what liens affect the title. This type
of policy, called a Lender's Policy, is much less expensive and
poses less risk to the title insurance company. Before issuing
a title policy, the title company will search for liens, judgments,
easements or any other items of record that can affect title to
the property.
The cost of
title insurance is based on the sales price for an Owner's policy
and the loan amount for the Lender's policy. The title insurance
only protects against losses arising from a transaction that happened
prior to the date on the policy. Title problems occurring after
the close of escrow are not covered in a title policy.
As with escrow,
the title insurance company generally comes as a recommendation
from your realtor or mortgage professional. Generally, you will
not have any contact with the title insurance company during the
selling or refinancing process.
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