In some states around the country, attorneys examine the recorded documents relating to title and issue what is referred to as a “Statement of Opinion”. This statement outlines the details of the attorney’s search, which records were examined, and what encumbrances exist against the title. The attorney’s opinion of title does not insure against undisclosed defects nor does it insure marketable title. You still need title insurance to cover these defects.
Whereas under a policy of title insurance you are insured for losses due to defects in the title, subject to any exceptions stated in the policy, under an attorney’s statement of opinion, you would have to sue the attorney if a negligent mistake was found.
Generally you would have to prove that the negligence caused you to suffer losses. An attorney is normally not liable if you should suffer loss due to “hidden hazards” in the title. You should always request a policy of title insurance if it is available in your area.
Currently most all states offer title insurance, except the state of Iowa, which offers a “title guarantee” policy which provides almost identical coverage to that under a policy of title insurance.
Title insurance is your protection against loss if any problems, such as fraud and forgery, defective deeds, mental incompetence, confusion caused by similar or identical names, clerical errors, or “hidden defects” result in a claim against your title and ownership. Since the policy premium is a one-time fee, paid at the onset of the policy, the protection it affords could prove invaluable. Check your area for local title companies offering title insurance and compare rates. Look for a reputable company, one which has been in business for at least 8-10 years, and ask about the services they provide.
If you have an attorney handling your closing, request that the attorney obtain the title insurance coverage for you. The coverage under your policy of title insurance will last as long as you or your heirs hold title to the property.
What are some other possible title defects?
- False impersonation – not the true owner of the property
- Forged Deeds, Releases, and other Documents
- Deeds by persons of Unsound mind
- Deeds by minors
- Invalid documents – such as an expired Power of Attorney
- Liens for Unpaid Estate Inheritance and Gift Taxes – against Prior owners of the home
- Unrecorded Easements – rights of way
- Undisclosed Heirs – heirs of former owners
It is particularly important for you to purchase title insurance if you are buying a property from a foreclosure or from an estate sale. In these cases there is no “seller” to whom questions can be asked regarding past transactions.