What is Title Insurance and do I need it?
Titles have a 'chain' and title insurance companies search public records to find out what liens might have been placed against your home since the home was originally built.
To understand how title insurance started, you'd have to first understand that historically property transfers were manually recorded into multiple books, one for 'grantors' and one for 'grantees'. Originally, these books were stored in archives, they were heavy, bulky (not to mention dusty) and were often maintained at courthouses or Clerks offices. Fortunately, today most of these records are recorded on computer and much easier to access and maintain.
In order to track records using the old system, a title search would start with the most recent deed, track that backwards until that person took possession of the deed, search back from that person, etc., etc., etc., until the original property owners name came up. Often, this would end when the main parcel of land was originally purchased or deeded and often this would involve significantly larger parcels of land (i.e. the development).
There are three basic types of title insurance and each covers different aspects of your title:
A) Basic Owner's Title Policy Coverage
As the owner of record, you are ensured free and clear title to the property, you're protected in the event of incorrect signatures, forgery or fraud, defective recordings, restrictive covenants in the property and from encumbrances or judgments which may be discovered after you purchase the property and take possession.B) Basic Lender's Title Policy Coverage
The lenders coverage protects the lender from unrecorded liens including mechanics liens (those which are incurred for work performed on the property), unrecorded easements or access rights (for instance a prior owner may have claimed a piece of the property for right of way), and for other unrecorded documents or easements which have an impact on the property.C) Extended Owner's Coverage
The Extended coverage includes items such as building permit violations which may have been incurred from a prior owner (i.e. additions, fences, garages, etc.), changes in sub-division maps, violations incurred by previous owners, protection from home being in a living trust, structural damage which might have been a result of mineral extractions, and other encroachments and forgeries that might have been done after title insurance was issued.Each policy varies and it's critical that you carefully review your policy to see what protections are offered to you by the insurance company.
Title insurance premiums are paid only one time, when the policy is purchased. Payment of the policy is typically done by the buyer, but may be negotiated with the seller. In some cases depending on your local customs the costs may be split between the buyer and the seller. Ask your Mortgage lender or your realtor what the customs are in your area of Florida.