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Talking Titles
The ins and outs of Real Estate 101
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Business New Haven
1/26/1998
By: BNH
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John A. Parese is vice president of and a partner in the New Haven law firm of Parrett Porto Parese & Colwell.
What's the difference between a deed and a title?
A deed is a document that transfers title. Title is a concept - you can't put your hands on it - that has to do with ownership interest in anything.
What is a title search?
Physically going to the land records in the town in which the property is located, looking through the indices and reviewing the documents - taxes, easements, liens - and reporting them. The search itself should be less than a day, but I've had some that have gone for a week or more.
How long should it take to clear a title?
The type of encumbrance on a title determines how long it takes. It could be instantaneous - or never. A mortgage is [one type of] encumbrance. It is literally a matter of me calling the bank, finding out how much is owed, sending a check and the bank sending me a release. That usually takes about a week, but can be done simultaneously. Easements can take a while or never be resolved.
Why has title insurance become
so important in real estate?
There has been a shift in the way evidence of title is handled in the last 25 years. When I started practicing, it was probably 90 percent attorneys' certificates of title that were used as part of the closing and about ten percent title insurance. Now it's virtually 100 percent title insurance. That has come about by the shift in banking. Twenty-five years ago, it was almost unheard of to have an out-of-state lender either buy a mortgage from a local lender or actually lend itself. Today it is common for banks to sell their loans. But they can't sell mortgages on the open market unless they have a title insurance policy.
Back it up how?
First of all, it insures that you own the property, and [second] that the bank has a first mortgage on the property [first one to be paid back if the owner defaults on the loan] and it's subject only to taxes due to the city and building and zoning regulations.
Who offers title insurance?
Generally it is issued by an attorney. Attorneys are the agents for the title insurance company.
What is the difference between owner's and lender's title insurance policies?
As an owner, I can buy a title insurance policy in which I insure that I own it. It insures up to the value of the property. That is optional. But if I borrow money from a bank, it can [refuse] to lend me the money unless I buy a title insurance policy insuring its mortgage.
The buyer pays the premium
for both the owner's and the lender's policy?
If you buy an owner's policy, the lender's policy is automatically included. [However] if you decide you that you don't want an owner's policy, but the lender says it needs title insurance, it is generally the borrower's responsibility to pay for it.
What is the range of title insurance costs?
The difference between buying the owner's policy and the lender's policy is modest. For example, an owner's policy protects up to $100,000, the cost of the property, but lender's insurance would insure the loan, let's say $75,000. The premium for a $75,000 policy is $292, and for $100,000 is $400. A difference of $108 dollars. A $250,000 owner's policy is $900, and a $500,000 owner's is $1,650. Unlike other insurance, it protects you against things that happened in the past instead of the future. You buy it once, and it's there for as long as you own the place, and the lender's policy for as long as the mortgage is in effect.
Does it cover environmental
liability?
No. Contamination on the property is not considered an ownership risk. [Among other things] it would cover survey discrepancies, insure access to a public street and easements.
What are easements?
Easement is a property right to use another person's property and is not the same as an ownership interest. It could be for something like right of way for a driveway or utilities (lines and pipes). The way to get rid of an easement is to buy it.
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