Title is a legal document that evidences a person’s ownership rights in a piece of property. When a seller sells a home, the new buyer takes title to the house. In order to protect the buyer and to ensure that he understands the ownership interest he is taking on, title insurance is generally purchased during the real estate transfer transaction.
Title insurance is essential because it serves as a guarantee that the property is transferred without unknown or unexpected claims or encumbrances. An understanding of the purpose of title insurance is essential in a real estate closing, but it is just one of many different issues that can arise during the purchase or sale of residential and commercial real estate. Parties to a real estate transaction should be represented by an attorney who can explain their interests and who can help to protect their legal rights. Sepahi Law Group, APC can represent both buyers and sellers in San Diego and throughout California in a real estate transaction.
Understanding Title Insurance
An individual or company who sells property cannot transfer a greater ownership interest in property than the interest he or she posses. For example, if a property owner has a property that he owns but there is an easement allowing a neighbor to use a portion of the property, the owner cannot transfer the property without the easement. Instead, the easement would go along with the property and the new owner would also have to abide by it.
In addition to easements, there may be many other things that limit a property owner’s actual total ownership of the property. For example, the home may have a tax lien on it or the homeowner may have had a judgment entered against him in a lawsuit and thus have had a lien placed on the house.
All of the different things that prevent free and clear ownership of the property are called encumbrances and they transfer right along with the title. The new property owner thus needs to be aware of all encumbrances, if any.
A title search is conducted to determine if there are liens or other claims on the property and to determine if the seller has clear title that can be transferred. This simply means that a search is conducted to ensure that the new owner will get the property free and clear and will have the only legal claim.
Title insurance essentially guarantees the outcome of the search. If it subsequently turns out that there are claims on the property, title insurance will cover the losses of the new buyer in resolving those claims, rather than the new buyer potentially being unable to protect his property or having to come up with money to satisfy the debts of the seller.
For assistance securing title insurance in San Diego or help with any other aspects of a real estate transaction, contact Sepahi Law Group APC today.