Title insurance is a policy of indemnity and protects against some, but not all, losses. Mortgage companies will require the borrower to obtain title insurance to protect their interest in the mortgage being made. Our recommendation is for all residential purchasers to obtain title insurance even if they are paying cash. If an issue arises, when a property is resold, relating to the title, this insurance can be the best, cheapest and quickest way to resolve it. For example, we have seen many times when the search of the title reveals an “open mortgage”, ie. a mortgage taken out by a previous owner but no document was filed to indicate that it was satisfied/paid off. This is a very real problem but if the current owner/seller provides a copy of their title insurance policy, the issue is usually “worked around, not solved” so that the sale can be completed.
There are policies called ENHANCED, that we suggest every consumer purchase. They are a bit more expensive but cover things such as if another person fraudulently records a deed conveying the property from you to another person or entity. These can also provide protection against certain zoning or building permit issues that may arise and provide inflation protection.
Most title insurance policies do not protect the owner from boundary line issues or disputes unless a special rider is purchased which requires a detailed, often called ALTA, survey. These surveys can take time and be on the expensive side. At a minimum, we recommend to our clients to at least obtain a boundary line survey with stakes, which can alert you to potential problems if you want to put in a garage, pool or are concerned about encroachments of neighbors onto your property or visa versa.
Oftentimes, we see real estate agents telling the buyer who will be issuing the title insurance and conducting the closing without telling the buyer that they have the choice. The agents typically direct them to a company that is an affiliate or a company that “courts” them. The cost of title insurance in Pennsylvania is regulated by the state and is the same with every company. Unless the agent is paying for the cost, it is the buyer’s option to choose. The Buyer’s choice should have little, if any, impact on a real estate agent. The real estate agent has no legitimate interest in whatever licensed title agency the Buyer chooses. We do see real estate agents, as a service to their buyer or seller client, help to obtain the results of dye tests and forward them along to the closing company because the local tax collector (rightly or wrongly) will withhold the issuance of the necessary tax information in order to close. But again, the impact is minimal and in reality the majority of closing companies will try to accommodate real estate agents whenever possible with things such as scheduling the closing time and place.
Mortgage companies, on the other hand, do have a real and serious interest in the closing company that is going to receive hundreds of thousands of dollars from them to fund the mortgage and the legal documents that need to be property executed and returned in a timely manner.
When obtaining title insurance, you should receive a copy of the title commitment prior to the closing which details items needed, coverages and limitations. Take advantage of that information and review it with either the title company or your attorney. Keep in mind that all of the exhibits listed may not be readily available and if you want to delve into the details there may be additional costs for the title searcher to obtain those and it most certainly will take additional time. After closing, the closing company will mail you the final title policy showing the recording information of the deed and, if applicable, the mortgage. This is an important document to keep. You should make a note on your closing file to call the title company if you do not receive it two months after your closing.
