Picture from www.museum.state.il.us
Deer Season: Not only an opportunity to stomp through the woods, but a chance to get together with family and friends who we only see once or twice a year.
Picture this: As you’re breaking down the stands and closing up the cabin, your uncle takes you aside and says ‘You know, it’s about time the hunting shack gets passed down to the next generation.’
Fantastic! It’s a great opportunity, and an easy thing to accomplish. All you need is a Deed of some sort, right? Technically, yes. But there is a lot more to consider. Once you’re in title, you are responsible for everything associated with that property, such as taxes, assessments, and encumbrances. Not a problem, you say? Well, sure the property’s been in the family for years, hasn’t it? True.
However: Your uncle may not tell you the full story. He may not even know the whole story. Things like judgments and tax liens transfer with the title. A judgment could come from any source, such as an unpaid credit card or child support, just to name a couple. Sometimes, people don’t even realize they have a judgment against them (unbelievable, but true.) And here’s something else to consider: The property hasn’t always been in your family.
Title Insurance: Here’s the thing: When a title insurance company gets an order for title insurance, whether it be a sale, a simple transfer of title, or even just a refinance of an existing loan, they search the history of the property.
Old Republic Title: Our underwriter, a national title insurance provider puts it like this:
Title insurance is an exclusively American invention. Its purpose was well stated in the first advertisement for title insurance back in the late 1800s:“This company insures the purchasers of real estate and mortgages against loss from defective titles, liens, and encumbrances. Through these facilities [the] transfer of real estate and real estate securities can be made more speedily and with greater security than heretobefore.” [circa 1876]Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is risk assumption through the pooling of risks for losses arising out of unforeseen future events (such as death or accidents), the primary purpose of title insurance is to eliminate risks and prevent losses caused by defects in title arising out of events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is excepted from coverage.
Long story short: for a one time fee, you are covered from the point of purchase until the point of transfer. If you own the property for 80 years, you are covered for 80 years. And if any issue comes up, say someone’s great-great-great-great Auntie Mable owned the property, died and no probate or other type of transfer was performed, or some document was recorded incorrectly, or whatever it may be, you are covered.
The insurance will pay for the legal expenses involved in fighting whatever claim may arise. If for some reason the claim is valid and irreversible, you are reimbursed for the property. Well, you’re reimbursed for whatever value you placed on the property when you purchased the title insurance.
What are the odds of something like that happening? Believe it or not, it happens a lot. For right around three to five dollars per thousand dollars of value, you are covered for life of ownership. Not a bad plan if you ask me.
