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Glossary of Title Insurance Terms
Abstract
A document showing the history of a property, as shown in the county's public records. This generally includes each change of ownership, as well as mortgages and liens.
Buyers Check
Special certificate certifying to judgments, suits, liens, etc. on names checked.
Closing
This is the final meeting, at which the property is officially purchased, paid for, and signed over. A closing may take place at a lawyer's office, or at the bank, or at the title insurer's office.
Deed
A legal document that describes the property (based on past surveys, official maps, surveyor's landmarks, measured distances, or other references), and states who owns the property. Deeds are public documents, filed with the County Clerk.
Easement
Rights, stated in the deed, that belong to someone other than the property's owner. This could mean the right of a neighbor to use a driveway, the right of power company trucks to use roads on the property to access their lines, or similar rights.
Escrow Service
As an additional service, title companies will handle escrows. There are various types of escrows. The most common is simply a disbursement service where the title company acts as an agent on behalf of the lending institution and the buyer and seller. The title company pays all real estate taxes, special assessments, prior mortgages; reviews all deeds, surveys and other documents; purchases transfer stamps and records all documents; draws checks and prepares an accounting of all funds disbursed. The cost of this service is customarily paid by the buyer.
Federal Court Check
Written report certifying to Federal Tax Liens and Bankruptcies on names searched.
Fee Insurance
A form of title insurance that protects the property buyer. This protection is against title problems arising from competing claims to the property, liens, mortgages, or judgments. This policy covers legal challenges, as well as refunding the value of the property in extreme circumstances. For complete details, talk with your title abstractor.
Legal description
A legal description describes a particular tract of real estate by referencing a specific lot and block within a subdivision or by metes and bounds within a particular section, township and range.
Lien
A financial claim on the property. A lien gives a third party the right to a portion of the money from the property's sale. The most common type of a lien is a mortgage, because the bank has a right to a refund of their money from the property's value. However, liens can also be filed by unpaid contractors ("mechanic's liens"), or courts ("judgments").
Mortgage
A type of lien, in which a bank or a person lends the money to buy a property. The property itself is the collateral in a mortgage, so that the lender can take the property if the owner doesn't comply with the mortgage's terms.
Mortgage Insurance
This is a title insurance policy that protects the mortgage lender from default relating to the title. Mortgage insurance is usually required by banks issuing mortgages. It provides no protection for the actual property owner, though, which distinguishes it from fee insurance.
Title Insurance
Title insurance is a form of insurance that guarantees an owner's claim to a property. This guarantee comes after a title company has performed an abstract of public documents, to uncover parties with competing claims to the property (heirs, liens, mortgages, etc.). Title insurance has several forms, including mortgage insurance (protecting the lender), and fee insurance (protecting the owner).
Title Report
30 year search showing any unreleased mortgages, judgments, suits, liens, etc.
Title Search
Land is the basis of all wealth, and because real estate is the only asset that cannot be moved or hidden, every possible party seeks it out for lien rights; the right to put something against the title for security purposes. To build homes, factories, schools and offices, people must first acquire land. Because ownership of real estate is so basic to our entire society, special laws have evolved which deal with land. For this reason, a title search is important in the purchase of any property. A title company, in its searches, will consider many items, some of which are listed below.
- Mortgages
A mortgage or trust deed is a lien on real estate. If a seller of real estate has a mortgage on his property and fails to make payments as required by his mortgage and promissory note, the lender can foreclose and sell the property. A title search will disclose whether there are any unreleased mortgages or trust deeds so that a prospective buyer can make arrangements to have them paid.
- Real Estate Taxes
In Michigan, if real estate taxes are not paid, the owner of the property can lose ownership. There are many instances where people have lost their homes because there were just a few dollars in delinquent taxes. A title search will disclose if the real estate taxes are paid and current.
- Special Assessments
When a city or village installs streets, curbs, sidewalks, sewers, streetlights or other improvements, they have the right to levy a special assessment tax payable over a number of years. Just as with real estate taxes, non-payment of a special assessment can result in the loss of ownership of a home. There are also liens called drainage district annual benefit assessments and city or village lien sales. A title search will disclose if there are any assessments and city or village lien sales and whether they are paid up to date.
- Judgments
If a person fails to pay a debt, he or she may be sued and a judgment entered against them. This judgment can become a lien on all real estate owned or acquired by the judgment debtor. An execution sale can be held and the real estate sold to satisfy the judgment. A title search will disclose if there are any judgments and whether they are satisfied.
- Federal Tax Liens
The federal government has the right under the law to levy against and sell, without court proceedings, a home or property of anyone whose federal taxes are unpaid. A title search will disclose if any federal tax liens exist against the real estate.
- Other Government Liens
The federal, state, county, township, village and city governments also have the right to lien and sell real estate to pay for various taxes and services. These liens include among other things, liens for inheritance tax, estate tax, income tax, sales tax, unemployment compensation contributions, old age assistance, demolition costs, cutting of weeds and removal of debris, retailers occupation taxes, water and sewer taxes, and others. A title search will disclose if any of these liens are present.
- Mechanics Lien Claims
Under Michigan law, any contractor who provides labor or material to a building and who is unpaid can, for a period of up to 120 days from the date of completion, file a mechanics lien as against a buyer of that property. That contractor can then foreclose and sell the house if he is not paid. The 120 day period makes this a "secret lien." A title search will disclose if any mechanics liens have been filed. A title insurance policy normally protects the buyer against the "secret lien" of mechanics' lien claims provided the title company requirements have been met.
- Decedents
When an owner of property dies, the title company determines who the heirs are, whether there was a will, whether estate and inheritance taxes are paid, whether creditors claims against the estate are paid, and considers probate proceedings, if any.
- Court Proceedings
There are also a multitude of court proceedings which can have an effect on title to real estate. For example: Mortgage foreclosures; decedents', minors' and incompetents' estates; Partition proceedings, Condemnations and others. When encountering lawsuits, the title search will disclose the effect of the proceedings on title.
- Covenants, Conditions and Restrictions
The use of land is frequently limited by deed restrictions. For example, many deed restrictions prohibit the construction of anything other than single family homes or require certain set back lines or that homes cost a certain amount. Some restrictions provide that if the restriction is violated that title revert back to the original owner. The title search discloses if there are any restrictive covenants.
- Easements
A title search also discloses whether easements are present. An easement is the right to pass on another person's land. Typical easements would include easements for utility lines, water well, joint driveways, etc.
- Survey
If certain requirements are met, the title company will insure that no encroachments and problems of survey exist.
- Your Choice
The home seller and buyer are entitled by law to choose the company that will do their title search, and to know if the title company is splitting its fee with one of the parties to the transaction.
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