There are several moving parts to purchasing real property. One important part involves title insurance. Imagine a scenario where you owned your property for several years and someone unexpectedly comes along and informs you that they have rights to your property. These types of scenarios are not that uncommon. This is the very purpose of title insurance. To protect you against unforeseen claims to your property.
These unexpected claims, or rather encumbrances, can range from easements that prevent you from using a portion of your property, to unreleased mortgages and liens that have the same ability as your mortgagee to foreclose on your house for failure to pay.
As such, before you close on the purchase of your property, it is critically important for you to inspect the property’s title. Generally, there are two ways to go about this. You can inspect the property’s title by searching through the records maintained by the county recorder of deeds and other public databases. Or, you can do what most people do and contract a local title company to perform the title search for you. The company’s title search would then culminate into a report (usually referred to as the preliminary title report), which discloses all of the property’s recorded encumbrances and claims. Significantly, the preliminary title report is usually the instrument the title company bases its policy on.
That policy will then insure you against undiscovered claims and encumbrances that where not uncovered by the title search. For this reason, title insurance is unlike most conventional insurance policies. Title insurance insures backwards; it insures against unknown claims prior to the policy date. Whereas your average conventional policy insures against claims occurring after the policy date.
Title insurance is based on contract principles. Thus, it is very important that you review and understand your title insurance policy to know what exactly is being covered. Schorr Law’s real estate attorneys in Los Angeles have significant experience with title reports and title insurance.
By Randy Aguirre, Esq.