Title talk

Explaining title insurance can help things go smoothly for everyone

Some aspects of title insurance can be confusing–especially to people who do not deal with it on a regular basis. The following questions and answers can help your clients understand this important part of buying real estate.

Why do I need title insurance?
Simply stated, title insurance is the insurance business applied to land titles. As defined in Article 9.02 of the Texas Insurance Code, "title insurance means insuring, guaranteeing, or indemnifying owners of real property or others interested therein against loss or damages suffered by reason of liens, encumbrances upon, or defects in the title to said property, and invalidity or impairment of liens thereon…" To your client, this means that after they decide to buy a new home, they will have an insurance policy that will protect them from hidden risks such as prior liens, undisclosed heirs, gaps in title, and forged documents.

The two most common policies are the owner policy of title insurance and the mortgagee policy of title insurance. The owner policy provides protection to the owner from financial loss due to covered claims that may be asserted against the title to the home up to the face amount of the policy. The mortgagee policy insures the lender’s loan against loss due to the defects in the owner’s title that were not discovered by the time of sale. The mortgagee policy offers no protection to the owner of the home.

Do I need a survey?
A survey is a geographical description of the boundary of a particular piece of property. It gives the dimensions and acreage of the property and provides a tangible representation of the property.

Surveys are done in order to produce a reliable, current description of the property in question. Many times a title company will request that a survey be completed because doubts about the legal description of the property may have arisen during search and examination of record title. If you choose not to have the property surveyed, you are demonstrating a willingness to assume any risk of problems that a current survey might disclose.

Kinds of surveys

• Perimeter survey: shows only the established boundaries of a tract, usually unsubdivided, with no interior detail documented. Generally, this form of survey is not considered sufficient for an "area and boundaries" amendment.
• Slab survey: done after the pouring of the slab, but prior to framing, in connection with new construction. Occasionally, a lender or owner will require such a survey in order to be assured that the completed improvements will be located entirely within the property’s boundaries and without intrusion into easements or across building setback lines.
• As-built survey: done after new construction has been completed and shows location of all features related to the new improvements.
• Blue-line survey: defines a survey plat in hard copy form, which is characterized by a blue-ink depiction of the property and its details, as opposed to a photocopy. Lenders’ and purchasers’ counsel occasionally require this type of survey because it is readily identifiable as the surveyor’s original work.

Survey Terminology

• Access: a legal right that connects land to a public road or street, such as an abuttal, license, or easement.
• Easement: a right created by grant, reservation, agreement, prescription, or necessary implication that one has in the land of another.
• Encroachment: the building of a structure or any improvements partly or entirely intruding upon the land of another.
• Improvements: generally buildings, but may include any permanent structure or other physical enhancement.

Mobile home Q&A

What is a mobile home (manufactured home)?
For title insurance purposes, a manufactured home is any structure which is towed to the building site using its own wheels, tongue, and axles. Until about seven years ago, a manufactured home was considered a vehicle and had license plates.

Why are there special rules for insuring manufactured homes?
Until permanently affixed to the real estate so as to become real estate, a manufactured home is personal property–just like the lumber, bricks, plumbing supplies, and wiring used to construct a conventional home are personal property until incorporated into a permanent structure. Under the provisions of the Texas Title Insurance Code (Articles 9.02 and 9.07), a title insurance company can insure only title to real property. Thus, title insurance companies in Texas are considered single-line insurers. Until title to the manufactured home is properly turned in to the appropriate regulatory body, it is personal property, and the value of it cannot be insured.

How can the lender be assured that the title insurer is satisfied with the procedures attendant in converting a manufactured home to real estate?
For a lender’s counsel, it is best to have the lender request a Manufactured Housing Endorsement (T-31). The title company will not issue this endorsement until the company is satisfied that the mobile home has been converted to real estate.

What is the price of a T-31 endorsement?
Twenty dollars.

The information in this article is provided by Georgetown Title Company Inc., Georgetown (512/930-9200 or gtc@juno.com).

 

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