Title 101: What Every Realtor Should Know About Title Insurance

Let's talk title! It's one of the most important parts of a real estate transaction, but also one of the most overlooked.

As a Sales Associate at Chicago Title, I want to help make this process a little less intimidating. You don't need to be a title expert, but understanding a few basics can help you avoid delays, protect your clients, and get to the closing table smoothly.

1. What Is Title Insurance, Anyway?

Unlike car or home insurance, which protects against future events, title insurance protects against issues from the past that could affect someone's ownership of a property.

Think unpaid contractor bills, unknown heirs, ownership disputes, or liens from previous owners.

There are two main types:

• Owner's Policy: Protects the homeowner's ownership interest, generally for as long as they or their heirs retain an interest in the property.
• Lender's Policy: Protects the mortgage lender's interest in the property until the loan is paid off.

The best part? Title insurance typically involves a one-time premium paid at closing, rather than monthly payments.

2. Your Title Commitment Is Your Roadmap

The title commitment is essentially a preview of the title insurance policy. It outlines what needs to happen before closing and what the policy will and won't cover.

Here's the quick breakdown:

Schedule A: The Who, What & Where

This section includes ownership information, the property's legal description, and policy details. Double-check names, marital status, and property information. Remember, we insure based on the legal description, not just the street address!

Schedule B-I: The To-Do List

These are the requirements that must be satisfied before the policy can be issued. Look for mortgages, unpaid taxes, judgments, liens, or other issues that need to be resolved.

Schedule B-II: The Exceptions

This is what your title insurance policy doesn't cover. Think easements, property restrictions, and certain survey-related matters.

My tip: Don't just skim your title commitment. A few minutes of review can save days of headaches.

3. Watch Out for These Common Title Red Flags

Not every title issue is a dealbreaker, but some deserve immediate attention.

• Liens: Unpaid mortgages, taxes, or contractor bills attached to the property.
• Encroachments: A fence, shed, or structure crossing onto someone else's property.
• Easements: Another party's legal right to use part of the property, potentially affecting your buyer's plans.
• Ownership discrepancies: Divorce, death, or missing heirs can complicate who has the right to sell.
• Lis Pendens: A public notice of pending litigation involving the property. Definitely worth a phone call to your title team!

4. Don't Overlook Owner's Extended Coverage

One of the most valuable conversations you can have with your clients is about Owner's Extended Coverage (OEC).

This additional coverage can remove certain standard exceptions from the owner's policy, providing broader protection against risks such as unrecorded easements, parties in possession, and certain survey-related issues, subject to underwriting requirements.

It's also worth understanding the difference between an Improvement Location Certificate (ILC) and a survey, especially when property boundaries or encroachments are a concern.

5. The Secret to a Smooth Closing? Communication.

Title isn't just about paperwork. It's about making sure everyone involved in the transaction is on the same page.

Confirm contact information early, pay attention to title deadlines, communicate contract amendments, and don't hesitate to ask questions.

And one final reminder: Always have your clients call the title company using a verified phone number before wiring funds. Wire fraud is real, and a quick phone call can prevent a devastating mistake.

My Final Takeaway

You don't need to memorize every title term or understand every line of a commitment. That's what your title team is for!

My goal at Chicago Title is to be more than someone you send contracts to. I'm here to answer the weird questions, work through the complicated situations, and help make your transactions as seamless as possible.

When in doubt, call your title rep. That's what I'm here for!