When we open escrow for the purchase of your home, one of the first tasks your escrow officer will perform is to order a PRELIMINARY TITLE REPORT from a title insurance company. The title insurance company used is specified as part of the purchase offer and counter offer process.
The title insurance company will search all public records. Title insurance companies maintain “plants”; that is, giant databases of title records, in many cases dating back over a hundred years. Each day, recorded documents affecting real property and property owners are posted to these title plants.
When the search is complete, the title insurance company will issue a PRELIMINARY TITLE REPORT, summarizing the current condition of title to the property, and listing any liens, encumberances, mortgages, covenants, and restrictions (CC&Rs) and easements.
The escrow officer and title insurance officer will work together on researching all liens and conditions that must be addressed before ownership of the property can be transferred.
Common issues such as mortgages, deeds of trust, tax liens or other debts simply require payment from the seller’s proceeds at close of escrow.
Some types of easements are also common, such as easements for public utility lines or public sewer easements. These easements remain on the property regardless of the property’s ownership.
Remember that the standard state of California purchase contract makes the seller’s ability to deliver clear title a contingency of your purchase. If the title search reveals issues such as a pending lawsuit against the seller, or a previously unknown heir, making transfer of the property’s ownership impossible, your purchase of the property can be canceled without penalty.
After the preliminary title report has been issued, the title insurance company will state that it is ready to issue a policy of title insurance.
Your mortgage lender will require both a California Land Title Association (CLTA) title insurance policy and an American Land Title Association (ALTA) title insurance policy.
The CLTA policy covers items in public records, such as mortgage and deeds of trust and judgment liens.
The ALTA title insurance policy is more extensive, insuring against both claims found in public record and by physically inspecting the property such as unrecorded easements, boundary disputes, and physical encroachments.
The CLTA title insurance policy insures up to the amount of the purchase price and benefits you as the buyer. The ALTA policy insures up to the amount of the loan and benefits the mortgage lender.
If you are buying the home to occupy it as your personal residence, the CLTA policy you receive will include the same extended coverage the lender gets on the ALTA policy.
Your policy of title insurance protects you for the entire time you own your home. If any person ever makes a claim against your ownership of the property – for example a person claiming a unpaid judgment against the previous owner of the property – the title insurance company will provide your legal defense.
When you sell the home, as the seller, you will provide the new buyer with a new policy of title insurance.
Would you like to know more? Call Bob Taylor Properties at 323-257-1080 or email at firstname.lastname@example.org