Title insurance insures the title to your land against defects that could not be discovered by an ordinary and diligent title examination performed by or certified to by a Licensed North Carolina Attorney.
All sorts of defects cannot be detected by an examination of the public records. A Deed may look fine on its face but may have been forged. There may be no liens filed against the property but there may still be a contractor or subcontractor that has not been paid and still could file a lien after closing. Property taxes could have been misreported to the title examiner. These are just a few of a multitude of things that could ultimately threaten the peaceable enjoyment of your property.
- Examines the tax records to confirm what, if any, governmental taxes or fees must be paid by the current owner before title passes to you;
- Examines the records of the Clerk of Superior Court to see if the seller has any judgments or other matters that must be cleared prior to closing;
- Examines the records held by the Office of the Register of Deeds for mortgages, easements, rights-of-way, and the validity of the instruments that have passed title earlier in time;
- Checks to confirm that your seller, if a business entity, is authorized to do business in North Carolina and is up to date with all filings with the North Carolina Secretary of State.
- Checks Estate files and Foreclosure file for completeness and accuracy if your title has such actions in the past;
- Compiles an Opinion on title based on the findings from the activities shown and provides it to the title insurer in order to get a Commitment to insure.
Remember what I said above. Title insurance insures your title against defect that could NOT be determined by an ordinary and diligent title exam by your attorney. Plus, if you are getting a loan from a conventional money lender, then the lender requires that the amount of their loan be insured as a first or second lien, depending on the circumstances.
Yes, but only to the amount owed by you to your lender and not as to all matters that might affect you. Let’s say you put 20% of the purchase price down and finance the balance. The amount you contribute, your equity in the property, is at risk. Should there be a total failure of title, then the lender could be paid in full but you will not recover your equity unless you get an Owner’s Policy of Title Insurance. It is worth noting that even with an Owner’s Policy, you are still not covered over matters of survey like encroachments and protrusions unless you get a survey before you purchase. That is why a survey by a Professional Land Surveyor is so important. Most lenders do not require a survey since they get insurance over matters of survey in most instances without having a new survey done.
The premiums for title are based on your purchase price and are set by The North Carolina Department of Insurance. The same rates are charged throughout North Carolina. Generally, the lender’s policy is the vast majority of the total premium. You only pay for insurance on your equity along with a $25 “Simultaneous Issue” charge when issued at the same time as your lender’s policy. Here is an example:
You agree with the seller to pay $200,000 for the house but borrow $160,000 from SLOWEN LOANS to assist you with the purchase. The total premium for such a transaction will be around $588.00, depending on what Endorsement your lender requires. The portion of the total that represents the insurance on your equity is about $106.00. A small price to pay to insure your $40,000 don’t you think?
There is also a way for you to get a reduction from the “full premium”. It is likely that the seller purchased an Owner’s Policy when they purchased the property. If that policy is provided to the new title insurer (it is your choice as to which title insurer is used), then you can get a significant discount on the premium for your policies. To follow the same example from above, let’s say the seller gives you a copy of the Owner’s Policy issued when they purchased and paid $175,000.00 for the same property 4 years ago. With the seller’s policy in hand, your total premium based on this example is reduced to $394.00 with only $92.00 being the portion paid to insure your $40,000.
North Carolina is one of the only states that requires that title insurance only be issued based on the Title Opinion by a licensed North Carolina attorney. To do otherwise would be the unauthorized practice of law. What this means to the consumer is that a more thorough examination is done when a competent lawyer is examining the title so there are fewer losses to the title insurer as more care is taken across the board. It is worth noting here that the rates have recently gone up as a result of all the losses taken by the title insurers following the fraud and deception by lenders, builders, appraisers and even some lawyers in what some call the “Housing Debacle of 2008”. Others might call it “A Series of Unfortunate Events”. Because of the protection provided by the title insurance industry, many owners of real property were protected and their land title successfully defended without cost to them since the title insurance company hires and pays the lawyer defending your title.
You might get pressure from your lender, and possibly even you Realtor to use “their” company, but Atlantic Land Title Agency, Inc., is managed by someone who examined titles and performed closings for thousands of clients over a quarter of a century. It is with that experience that we are able to provide more efficient underwriting and better service than most. It is a rare instance these days that you will find an attorney in a title insurance office all day, every day. Each Commitment and Policy is prepared with diligence and thought…not just as a routine part of a routine day.