The idea that title insurance cannot be had if a property is encumbered by a quit claim deed has history that proves otherwise.
In fact, a quit claim deed can be quite useful in settling property ownership rights. Should a title search uncover claims against a property, having the claim holder sign a quit claim deed can clear the way for present and future sales. Quit claim deeds are also useful in defining boundaries or ownership issues.
When to Rely on Quit Claim Deeds
Quit claim deeds are often part of divorce settlements, insofar as ownership of the property in question can be transferred to one person with just a signature. Other issues that prove the value of quit claim deeds include marriage, when one person can add or subtract a spouse from a deed; if a previous property owner still has possible claims, a quit claim deed can quickly solve that problem; and, someone preparing an estate or living trust can use the deed to grant ownership of the property into the trust.
Benefits and Problems of Quit Claim Deeds
Someone who signs over a quit claim deed can remain on the property by obtaining a life estate, which provides the right to stay on the property until death. A quit claim is beneficial if one is taking over or relinquishing a property. But once it is done, a quit claim is difficult to change or eliminate. Also, a quit claim presents no warranties. That problem can be solved by using a warranty deed that promises a property is clear of any encumbrance.
The Value of Title Insurance
Before title insurance came on the scene in 1853, property buyers were forced to rely on the honesty of sellers. Title insurance made possible faster, more reliable and safer property transfers. Also, because title insurance weeds out properties that have potential problems, it is easier to package mortgages and sell them to financial institutions. Title insurance is there to ensure that property buyers are protected from losses connected with title deficiencies, liens or other potential problems.
The Role of Title Insurance for Lenders
Institutional lenders who finance real estate deals require title insurance to guarantee their investments are sound. Separate policies for construction loans are available in several states, although these are not used very often. Loan policies are provided only for mortgage lenders. These loans routinely occur after a mortgage loan is secured, which means that the policy protects a loan buyer if the loan is somehow transferred.
The Global Impact of Title Insurance
America’s title insurance exists largely because of problems connected with the U.S. land records law. Most states use a system of property recording that has no government official making decisions regarding title ownership or whether property transfers were valid.
Other countries rely on land registration systems for changing property interests, and some U.S. jurisdictions have adopted similar processes. Many foreign countries have title insurance.
Several of those countries are served by American title insurers, although they don’t provide a big part of the U.S. firms’ revenue stream. Often times, the properties needing title insurance are commercial interests involving American companies doing business abroad.
Ownership Attributes of Title Insurance
A home owner’s title insurance policy guarantees the property is free of all ownership problems. It also covers all expenses if the title cannot be sold. These and other basic coverage can be augmented by more expansive types of property owners’ policies that provides for other kinds of losses.
