A title policy is a contract between you and a title company saying if a defect on the title arises, the title company will pay to correct the issue or will pay you for the loss of value you incurred as the result of a title issue.
Although a title company agrees to protect you from loses from title issues, the coverage is not absolute. All title policies will contain a list of exceptions or types of claims that will not be covered under the policy. Common exceptions include liens which the purchaser knew about at the time of the sale, environmental issues, zoning issues, and things that would have been discovered by a survey of the property. The exceptions to a title policy will be listed in the policy, but also on the initial document called the “title commitment.”
Many buyers and sellers mistake the title commitment for a title search. Although it is true that a title commitment will include the items found during a title search, it is also much more than that. A title commitment is a promise from the title company to issue a title policy if the conditions listed in the commitment are met.
The conditions in a title commitment are those things that must be done for the title company to insure the title to the property. Common conditions include the payment of the mortgage on the property and release of the lien. The title commitment may also have conditions regarding the seller providing affidavits, such as an affidavit stating that they are not aware of any liens against the property or parties that may claim a mechanic’s lien.
An endorsement is a document added to the title policy that extends the coverage. For example, it was noted above that zoning regulations are often excluded from a property. Despite this being a common exclusion, the policy could cover zoning issues if the right endorsement is added to the property.
At Rick Davis Real Estate Title we issue title policies on behalf of Old Republic National Title Insurance Company. To learn more about obtaining a title insurance policy through us, give us a call at (913) 303-RICK.