Jackson Abstract & Title Company
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Title Insurance - One of the World's Best Bargains
by Billy Vaughan

Most individuals do not understand the value, liabilities and obligations of the title industry as it pertains to abstractors, attorneys, examiners, escrow, closers, title agents and the title insurance underwriting companies. After over 40 years in the title industry I have gained an overview that I consider a privilege to share with you.

In many parts of the country, to expedite and centrally locate all necessary records, geographic indexed records (title plants) are maintained by title companies. The title plants are composed of all documents affecting real estate in a county. After an order is placed with a title company, a title search is made that produces a chronological record, i.e., information from recorded documents that may cover the entire history of the events occurring relative to a specific piece of property is produced. This is performed in some instances through automation, but primarily through manual efforts because of very, very old documents. The documents that are compiled have been prepared, executed and recorded over the many, many years by individuals or other entities. While some of those documents may have flaws, but still filed of record, the searcher or abstractor compiles the history as accurately as possible. This history is then provided to an examiner, who many times in an attorney, who checks the documents to verify that they have been properly prepared and executed, and that there is proper continuity in the chain of title of the property involved. Once the examination of the title is done to determine its insurability, a title insurance commitment is issued. The commitment shows the condition of title, the exceptions that may appear in the policy, the curative work that needs to be accomplished prior to the policy issuance (which normally requires legal assistance and may be very time consuming), and the documents that are needed to create the estate that is to be insured.

After the commitment is issued and the curative work completed, the transaction is set for closing. Funds are deposited with the title agent/attorney. The attorney/closer/escrow officer is charged with the responsibility of coordinating with the attorney(s), buyer(s), seller(s), lender(s), and Realtor(s) involved in the transaction, and following the instructions in the contract of sale, lenders' closing instructions and to secure surveys, legal documents, payoffs of liens, tax information, etc. A great amount of time, work and detail goes into each closing. After closing, when documents have been executed, placed of record, and funds are disbursed, the title insurance policies finally can be issued. A mortgagee's title policy only insures the lender so an owner's title policy is needed to insure the buyer.

The title insurance policy can have broad coverage. In some cases, it can insure survey coverage, and in effect, guarantee the work of the surveyor. In most cases mechanic's lien coverage is given, actually insuring the financial responsibility of contractors, subcontractors, and/or suppliers who furnished material or did work on the property. It insures that the people executing the documents are whom they hold themselves out to be and that there are no forgeries. The list of coverage can go on and on and may differ by state. It is important to understand the exact coverage available in your state, so contact a local Lawyers Title Agent.

If the abstractor/agent/attorney/examiner/closer/title agent makes an error, or, a hidden defect arises, or, one of the other coverage in the policy creates a loss, then the loss is one that will be addressed by the title insurance underwriter. In many cases, the matter can be corrected. However, there are a great many expenses incurred each year by the title industry to clear titles and pay losses.

Such a complicated and involved process has other high costs in addition to losses. The general public does not recognize the great expenses that are involved in maintaining the title plants and covering the overhead of abstractors, examiners, escrow officers, title agents and underwriting companies; in fact, many people do not realize what a bargain they receive with the payment of a one-time insurance premium. Most people spend much more money each year on vehicle insurance, than they will on the one-time premium for title insurance on their home!
The individual citizen' and business people in this nation would suffer greatly should this industry not have the level of professionalism, sense of competitiveness, and high degree of service that it offers at the present time. Service is taken for granted by many, but the industry is exploring new ways to provide better & faster service while maintaining the integrity of the work in this fast paced environment of today. This takes great investment and certainly obligates the companies to tremendous costs. In my opinion, excessive profits are not made and have not ever been made in this business for the work, the exposure and the obligations that are involved.

The value of the industry to the public cannot be overstated. No business in the world that I know of, warrants, validates, indemnifies and insures the work of as many people and functions for one premium as does the title insurance industry.

This talk is printed by permission from Billy Vaughn to help individuals understand the basics of title insurance and is not intended to be interpreted as an explanation of coverage of a title insurance policy. This coverage is found on the individual policies in your state contact a local Fidelity National Title Insurance Agent for details.




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