Title Insurance Basics
Over many years, specific laws have been put in place to govern ownership and transactions of real property, including title insurance. Ownership is evidenced by deeds, liens, and encumbrances such as mortgages, judgments, as well as easements and rights of way by other specific documents. These various documents that effect ownership and the quality of that ownership are recorded by county in a central, public depository called the Register of Deeds. This recording preserves the history of each piece of real estate and can be searched by specialized title searchers to determine who is the current legal owner, the condition of their title, and whether any liens or other encumbrances (problems) are recorded against such real estate. Similar to a doctor reading an x-ray, a real estate attorney will read the title search to be certain the title is free and clear of liens and encumbrances.
Since real estate transactions involve persons and lenders from areas outside the county in which the real estate is located, an industry has evolved known as title insurance. After examining the title search, a licensed title agent* certifies to the title insurance company the condition of title. The title insurance company will then write a title policy which insures 1) to the buyer that their title is free and clear of liens, encumbrances and other title problems and 2) to the lender that their mortgage (security for their loan) is properly re-coded and is a first lien against the real estate purchased. In the event a problem is discovered, the title insurance company will pay to have it resolved or if it cannot be resolved, the insurance will pay for the financial loss.
Title companies charges a one-time premium based on the amount of the transaction payable by the buyer at closing. In Pennsylvania, title insurance is a regulated industry and premiums are regulated. Therefore, all title companies are required to charge the same amount, including certain services such as: the search, closing and the title insurance policy. In a standard residential purchase, the title insurance premium includes the services of your real estate lawyer. Certain items such as negotiations and review of the agreement of sale are additional charges and should be discussed at the initial meeting between an attorney and their client. Regulation of the title insurance rates apply to commercial transactions but, unlike residential, commercial transactions involve more legal work.
Attorney Stuart Shmookler counsels clients in real estate transactions for both residential and commercial properties.
*Gross McGinley’s real estate team includes attorneys who are licensed title insurance agents.