WHAT YOU SHOULD KNOW ABOUT TITLE INSURANCE IN FLORIDA

What You Should Know About Title Insurance in Florida

Are you confused about title insurance in Florida? This article will provide you with a walkthrough of the closing process and outline what you should know about title insurance in Florida.

For most people, buying a home is one of the largest financial debts that they will incur. Moreover, one of the key points in building wealth is home ownership. Throughout the home purchase process and especially during closing, many folks are confronted with an onslaught of terminology and processes that are foreign to them, particularly if they are buying a home for the first time. Many times, the closing process is foreign to home buyers as they only have the minimum of understand concerning their obligations and right and what the outcome will result in.

Closing transactions in Florida are conducted by a title insurance agent, a notary and/or an attorney. Additionally, in ensuring the purchase of title insurance in Florida, your attorney or title insurance agent will facilitate the complete closing. The title agency managing your closing, will hold in escrow all funds including earnest money until the time of disbursement.

Do you know your responsibility as a home buyer?

What about the seller?

Is there a way for you to save money on your closing?

The following are most commonly asked questions regarding title insurance. We’ve also included a few horror stories showing how such hidden hazards can arise unexpectedly and threaten homeownership. We hope that this information will help you to better understand the value of title insurance in protecting your homeownership.

WHAT IS A REAL ESTATE CLOSING?

In the course of closing, real estate title is transferred to the buyer from the seller. During the closing process, all required funds are collected and all necessary paperwork is complete. A Closing Disclosure Form is executed and once signed converts into a legal document. Please be aware that unless you understand and agree to all of the terms in the Closing Disclosure Form, you should not sign it. A misunderstanding of what your signing could evolve into an extensive court battle in the event that changes need to be made.

In previous years, closings were conducted in an attorney’s office or a title agency. Today, a closing can be conducted in any preferred location so long as a notary is available. Florida law provides that either a licensed title agent or an attorney may conduct a real estate closing. Nonetheless, the Florida Department of Financial Services only controls those real estate transactions where either title insurance has been purchased or an escrow fund has been created for the closing by the title agent.

A typical closing for buyers includes the following:

  • Buyers taking out a loan for their home purchase will have to sign the mortgage note, which acts as the buyers pledge to repay the loan.
  • Buyers will have to sign the mortgage document, which provides interest in their home to the lending bank to be used as collateral for the loan.
  • Buyers are given warranties and inspection reports for the home.
  • Buyers will also receive a commitment for the issue of a title policy.

Make certain to check and go over any listed exceptions under Schedule B in the commitment. Once the buyer, seller and lender have received the distributed documents and funds, the deed to the property is recorded in county’s Clerk of Court where the property is located. The title policies are delivered once the recorded documents are returned to the title agency.

WHY YOU NEED TITLE INSURANCE IN FLORIDA?

Since buying a home is one of life’s largest investments, you will want to be certain it’s safely yours. Most homeowners provide for the security and safekeeping of their homes by insuring them against hazards such as fire, theft, and weather damage.

What you need to know about title insurance in Florida

What is title? Title is the ownership basis of real estate and represents your legal rights in the property’s use, control, possession and dispossession.

However, there is more dangerous exposure which can present a risk to your goal of homeownership. These dangers include such defects in the title to your property which can result in a partial or a complete loss in your investment. Even the most thorough search of the county public records may not reveal certain title defects on the property. A few of the problems that could suddenly surface are forged wills or deeds, title transferred by someone under age, a married person conveying real estate without their spouse, fraudulent impersonations, secret marriages, undisclosed heirs, invalid divorces, and false affidavits. Without the protection of title insurance, your investment is in jeopardy.

Fortunately, there is a way to protect your investment from these defects by purchasing owner’s title insurance.

Prior to the issuance of your title insurance policy, any defects in your title will be checked and reviewed by your title agent. In the event that there are issues with the title such as a lien filed by a contractor who did improvements on the property, unpaid taxes, an easement or any other potential title defects, there may be a risk to the free and clear ownership of the property.

So how can title insurance in Florida help you?

Title insurance offers protection to you and/or your lender from previous claims or prior rights that another party may have to the property, including any unsettled debt of previous property owners. Moreover, title insurance is centered around a public records search, which is estimated to establish the status of the title at the time the property was purchased. On the occasion that your title is challenged by another party, your title insurance underwriter will defend your title and pay any and all related costs and losses in property value that occurs, up to your title insurance policy limit.

Two Types of Title Insurance In Florida

The lender and owner policy are the two main types of title insurance in Florida. Some lenders might insist on using their own title insurance as a stipulation of your mortgage loan. The lender’s policy title insurance protects the interest of the lender in the title of your home. While an owner’s policy provides insurance for the owner of the property against certain types of claims which are usually listed in the policy. Additionally, the owner’s policy provides protection to the new owner of the property from a previous owner’s liabilities, such as the requirement of paying a lien that was placed against the property during the ownership of the prior owner.

In Florida, either the buyer and/or the seller are allowed to buy both lender and owner policy’s. Moreover, both title insurance companies and title agents can sell title insurance in Florida along with attorney’s who are in good standing with the Florida Bar.

Similar to other kinds of insurance, a title policy is paid as a one-time premium and stays in effect during the duration that you or any heirs own the property.

WHAT ARE THE ROLES OF TITLE AGENTS?

In the West Coast of Florida, the home sellers are the parties that get to choose the title company which they want to perform their closing. Although potential home buyers can choose the title agent, title agency and/or attorney that they would like to use for their closing, they will have to pay the sellers closing costs. If your real estate agent suggested a title agent, agency or attorney you have no obligation to use them. Title agents can represent multiple companies or a single one.

The title agent’s part in the purchase of your home is:

  • to get and prepare title searches;
  • to inspect and review the property title;
  • preparation of the closing documents;
  • preparation and issuance of title insurance;
  • administer the closing;
  • disbursement of funds

SELECTING A TITLE AGENCY FOR TITLE INSURANCE IN FLORIDA

In selecting a title agency to work with for your closing, you might talk with people you know that have recently purchased a home and what their experience was like with their title company. Additionally, your real estate agent or mortgage lender title agencies that they have worked with in the past.

Compare several title agencies costs and services. In Florida, the premiums on title insurance are set by the state, see Florida Adminstrative Code, Rule 69O-186.008. Only the title agency or title agent fees can be negotiated.

Select an experienced and licensed title agency with a good reputation. You can check the license status of the agency by visiting the Florida Department of Financial Services. A good title agency will have agents that are professional and will answer any questions about the policy you are purchasing as well as provide a detailed explanation about the requisite fees for your closing.

IMPORTANT TERMS FOR TITLE INSURANCE IN FLORIDA

Abstract of Title is a collection of instruments going to the earliest public records and comprises of all the physical copies of any recorded instruments affecting title of the property being searched. A substitute approach includes a review of the records for 30 years from the date of a valid root of title.

Clear Title refers to title which is free from any defects, encumbering the owner’s right of peaceful enjoyment of the property and/or cause the owner to lose any part of the property.

Cloud on title refers to a scenario where a possible future claim exists on the title to the property.

The Closing Disclosure, shows the financial numbers associated with the closing. Additionally, as of August 2015, the Closing Disclosure has directly replaced the following forms: (1) the HUD-1, (2) the Good Faith Estimate, and (3) the Truth in Lending Act forms.

Earnest Money is a typical requirement on the buyer used showing their sincerity for entering the contract to purchase property.

Easements refers to a right to use another’s real property for a specific purpose. Although an easement is a real property interest, it does not grant legal title to the property which remains with the original property owner.

Eminent Domain is a constitutional government taking of private property to be used for a public purpose. The taking must be for a public purpose and full compensation is paid to the owner of the property.

Lis Pendens refers to formal written notice that a law suit has been filed concerning real property.

Primary Title Services are recorded on the Closing Disclosure and consists of examining the title search records, freeing any underwriting hurdles, finalizing insurability, preparation and issuance of the title commitment along with the title insurance policy.

Property Encroachment, occurs when one’s property runs onto another person’s property. Some examples of property encroachment include bushes and shrubbery, fencing, decks and sheds.

Related Title Services are generally described as closing services and are recorded on the Closing Disclosure. Closing services consist of preparation of the necessary documents for closing, performing the closing and the disbursement of closing funds.

Restrictive Covenants refers to a promise in an agreement or a contract that restricts, limits and/or regulates the land use in order to preserve any adjoining property.

Simple escrow refers to a closing where title insurance is not issued.

Title Commitment refers to a title insurance binder.

Title Defects are legal issues caused by conflicting and/or adverse interests that get in the way of determining the property’s true owner and the authentication of the title. Title defects result when either ownership or transfer of ownership is not recorded properly.

Title Search refers to the gathering of title information from official records, showing a compiled list of all previous official records affecting title of the property being purchased.

Writ of Interpleader is an official court order which instructs a title company on the disbursement of funds in escrow that are in question.[/vc_column_text][/vc_column][/vc_row]

FREQUENTLY ASKED QUESTIONS (FAQ’s) ABOUT TITLE INSURANCE

Why is the transfer of title to real estate unique from other things such as the transfer title in a car?

Because land is permanent and can have may owners over the years, various rights in land may have been acquired by others (such as mineral, air or utility rights) by the time you come into possession of it, even if the land has never before been built upon. In order to transfer a clear title to a piece of land, it is first necessary to determine whether any rights are outstanding.

What is a title search?

A title search is a comprehensive review of the available historical records concerning a property. Some of these records include but are not limited to: deeds, court records, name and property indexes. The reason for the title search is to authenticate the rights of the sellers to transfer ownership, and to determine if the property has any claims, defects and other rights or burdens against it.

What will a title search show?

Performing a title search can reveal a number of title liens and defects, along with additional encumbrances and restrictions. Included items include any unpaid taxes, open mortgages, seller’s judgments and any restrictions limiting the land use.

Are there any issues that a title search may not uncover?

Absolutely. There are certain “hidden hazards” which even the most thorough search will never find. One example is when the previous property owner improperly stated his marital status, and as a result his legal spouse files a claim. Furthermore, forgery, fraud, defective deeds, mental incompetence of the transferor, identical and/or similar names and clerical errors by the clerk are additional examples of hidden hazards. These property defects usually come up after the purchase of your home and can threaten your legal right to ownership of the property.

What would my losses be if a claim is filed against my property?

This be contingent on the type of claim filed. In the worst-case scenario, you could sustain a complete loss of your home and property, while still being liable for the remaining mortgage balance. Generally, the majority of claims aren’t this severe, but regardless, any claim will cost aggravation, money and legal fees for your defense.

How will title insurance in Florida protect the purchased property in the event that a claim is filed?

In the event that a claim is presented against your property, according to the terms of your title policy, a legal defense will be provided and will cover the court costs and related legal fees. In the event that the claim turns out to be valid, any actual losses that the policy holder suffers will be reimbursed as per the cap amount of the policy.

Isn’t a deed sufficient proof of ownership?

Unfortunately, a deed is not always enough. The deed is not proof of ownership, but rather a document that is used as a right of ownership when land is transferred. The deed doesn’t speak to the rights that another person may have to the subject property. Furthermore, a deed does not show any title encumbrances such as claims or liens against the title.

Would an abstract show property restrictions and limitations?

It might and maybe it might not. An abstract provides the property title history available in public records and may contain various errors and other hidden hazards which may put your ownership rights at risk without having a title insurance policy.

What if I have an attorney’s opinion?

An attorney’s opinion will not yield any better results in finding title issues, because an attorney’s search no matter how comprehensive is still centered around the public records. Moreover, contrary to a title insurance company, an attorney will not be liable in the event that you suffer a loss due to hidden issues with your title.

The owner of the property that I am purchasing had a title search six months ago and has lived in the property since then. Do I need another title search in this scenario?

Yes, it does not take long to encumber title. The owner of the property you are purchasing could have either gotten married, divorced, granted an easement or made construction improvements on the property as well as encumbered a lien against the property. Due to any of the aforementioned reasons, conducting a current title search is the only way to avoid such issues.

Do I need to get title insurance in Florida on land that I purchase from a builder if I purchase a home from a builder who already has a title insurance policy on the property?

The builders title insurance in Florida only provides protection for the builder and not you. As previously mentioned encumbrances may have attached to the builder’s property since the time that his title insurance policy was issued.

What types of title insurance policy can you purchase?

There are two types of title insurance policies, the loan policy and an owner’s policy. A loan insurance policy is used to protect the interest of the lender in the property for the remaining balance on the buyer’s mortgage. An owner’s title insurance policy protects the buyer’s equity and/or investment in the property based on the amount of coverage as per the policy.

What is the cost of a title insurance in Florida?

Although the cost varies slightly from county to county, typically title insurance in Florida comes to around one percent of the cost of the property. The cost of the policy includes an exhaustive title search, review and additional associated services. In contrast to other types of insurance premiums, that are paid on a yearly basis, title insurance premiums are only a one-time payment, generally at settlement.

What is the duration of title insurance coverage?

Coverage will last for all of the time that the owner or the owner’s heirs maintain an interest in the property.

Coverage will last for all of the time that the owner or the owner’s heirs maintain an interest in the property.

From a reputable, Florida licensed title insurance company such as Compass Land and Title, which has several locations in the Tampa Bay area, including Palm Harbor, Tampa and Saint Petersburg. Moreover, a title insurance company such as Compass Land and Title can perform a closing anywhere in the State of Florida.