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First a few definitions: Title refers to the ownership of a property and the documents evidencing that
ownership. The history of the ownership of a property and any encumbrences is called the Chain of Title.
An encumbrence is anything that limits the title to a property such as loans, easements and restrictions.
An easement is a right, privilege or other interest that one party has in anothers land. A common
example would be the right to pass over the property.
While you are in escrow to purchase a property a Title Company will research the Chain of Title, by examining
public records, including court judgements and prepare a Preliminary Report. This is a report that shows
the ownership of a specific property, together with any liens and encumbrances which will not be covered
under a subsequent policy of title insurance. The report provides the opportunity to request the removal
of items, which are unacceptable to the buyer, prior to completing the purchase.
Download Stewart Title Report: 20 Reasons Why all Real Estate Titles Should be Insured
Typically two types of title insurance policies are issued. One covers the buyer and the other covers the
lender until the loan is paid off. Both are issued and paid for in full at the close of escrow. The insurance is to
protect against a defect in the chain of title prior to your ownership.
The standard owners title insurance policy is called the CLTA (California Land Title Association). Another
policy, the ALTA has increased coverage. Most title companies have a premium policy that provides even
greater coverage for a little extra cost. It is recommended to request the premium policy, different companies
have various names for it.
After the title insurance policy has been issued, if there is a valid claim filed against your property, the title
company will pay for any covered loss plus the legal fees involved to defend your rights. The policy remains in
effect for as long as you or your heirs own the property.
Download Stewart Title Report: A Home is Only as Secure as the Title to the Property
Title insurance is inexpensive because most of the risk is eliminated by the preparation of the preliminary report.
In essence, title insurance is protecting you against errors in the preparation of the preliminary report.
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