What is Title Insurance and Why is it Needed?

Title insurance is a form of insurance used to protect and insure real estate buyers from defective title. It protects the buyer and seller against loss due to title defects, liens, or claims of ownership by other parties in future.

DOES THE STATE OF TEXAS REQUIRE TITLE INSURANCE?

No, it does not! The lender may require title insurance for security purposes.

WHAT ROLE DOES THE TITLE COMPANY PLAY?

A typical title company issues insurance, holds onto funds in escrow, provide with a closing and/or an escrow officer to close the deal. A title company is vital for the real estate transaction. Therefore, it's always a good idea to research before finally choosing one! What could make your job easier would be the reviews and ratings of the title company by previous customers. It would also help to see if the title company underwrites with a prestigious insurance company. Big companies stay in business longer, which means, you will be ensured protection!

STEPS OF WORK FOR TITLE COMPANIES:

1. Conducting a Title Search
2. Creating an Abstract of Title
3. Issuing Title insurance
4. Maintaining the Escrow Account
5. Providing Closing Agent
6. Transaction Completed

CAN I SUE MY TITLE COMPANY FOR NEGLIGENCE?

Yes, you can! The title insurance issued may cover your damages up to the policy limit.

WHAT IS NOT COVERED UNDER TITLE INSURANCE?

There may be circumstances where a defective, restricted, or non-saleable title may not be covered by a title insurance policy. For example defects that are not included in the title insurance coverage like water or mineral rights, information not available in public records or defects not covered under surveys.

LEGAL ISSUES PRETAINING TO TITLE COMPANIES:

Types of Legal Disputes you may come across:

• Failure of thee title company to identify ownership claims, liens or other defects related to the title
• Issues arising due to pre-existing defects of title
• Fraud and misrepresentation by an Escrow or Closing Agent
• The title company failed to keep the terms of agreement or breach of contract.

Title companies play a pivotal role in real estate transactions. Thus is vital for the title company to exercise protocols and procedures for timely and effective execution of contract. If you believe that your title company breached their contract or misrepresented information that resulted in a loss, you may hire an Attorney to represent your interests against the company.

There may be ways through which negotiations could be possible by re-drafting the agreement or changing the terms within. Although, this might always not be an option and may require a lawsuit to recover actual and punitive damages as a result of negligence by the company. You will need to consult an experienced Real Estate Attorney who can help you in putting together a strong case.

EXAMPLE OF WHEN A LAWSUIT COULD BE FILED AGAINST THE TITLE COMPANY:

Homeowner Mr.A bought a house in 2015 after clearance from their title company that the title of the house was clear, Mr.A assuming the title was clear paid the seller the amount of sale in good faith, Mr.A in 2016 receives a foreclosure letter as a result of a Mechanics Lien on the house since 2013 that the title company failed to identify. In such a situation, Mr.A will sue the title company for their negligence in proper title search.