Welcome to the FAQ’s where various topics and questions are enlightened for you in the Real Estate canvas. Please do not hesitate to contact TruLine Realty with any questions of your own as they will be answered by a very knowledgeable team of TruLine’s Broker and Agents. You may contact TruLine by calling (323) 389-5432, email at firstname.lastname@example.org, or fill out the contact form at the end with your question(s) and information.
What is Title Insurance and why do you need it? Many buyers and sellers are familiar with the term and think of it as just a standard part of any real estate transaction, but what title insurance actually does remains a mystery to most.
Most consumers are familiar with auto insurance or property insurance, which protects the insured and pays out on the policy terms after a hazard or accident has occurred. Title Insurance, on the other hand, focuses on eliminating the risk of potential claims or something interfering with a property owner’s rights before they occur.
Before a transaction closes, the Title Insurer conducts a thorough search of the public records, sometimes going back for over a hundred years, regarding the property being purchased. They look for anything that might affect the title and the property owner’s right to the full ownership and enjoyment of their property, such as easements, unknown owners, unidentified liens, rights of way, legal actions, government restrictions or other encumbrances. This helps the property’s new potential owner understand if anyone else has a claim to the use or ownership of their property and, if so, how the owner may be affected or what they need to do to eliminate that potential risk.
Of course, these searches are not always perfect, and that is where the insurance part comes in. If a claim arises from an unknown (non-excluded) source after the property has been purchased, the title insurance kicks in and the title company assigns professionals to handle the claim pursuant to the title policy’s terms.
Often times in a transaction, the new owner will have their own title insurance policy (usually paid for by the seller) and the lender will also have their own title insurance policy to protect their interest in the property (this premium is usually included in your lender’s fees). The rates and premiums charged by Title Companies are filed with the California Department of Insurance and each company is required to post their fee schedules.
In the end, purchasing Title Insurance is an important step during the purchase of a new property to make sure that you fully understand what you are buying and to ensure your full right to use and enjoyment of your new home. Doing a complete title search is a laborious process and Title Insurance Premiums reflect that in their costs, but when buying a new home, rental property, or other investment, this premium is a small price to pay for the security of ensuring your full rights and interests in what you own and the added peace of mind.
When you purchase a new property, one of the questions that you will receive from Escrow and the Title Insurer is how you want the property to “vest” or, essentially, how you want yours and the rights of any other owners in the property to be secured and recorded on title. This can be a serious question with tax and estate planning implications attached (for an insight on how vesting affects married couples check out our blog). For your information, here are the typical ways that property may vest in California and what they mean, any specific questions you may have regarding your situation should be reviewed with your attorney and tax advisor.
Community Property w/ Rights of Surivorship
Tenancy in Common
|Parties||Husband and wife or domestic partners.||Husband and wife or domestic partners.||Any number of persons (can be Husband and wife or domestic partners).||Any number of persons.||Any number of partners.||Any number of beneficiaries of the trust.|
|Division of Interests||Equal.||Equal.||Equal.||Any number of interests, equal or unequal.||Partnership interests may be equal or unequal.||Beneficial interests under the trust may be equal or unequal.|
|Title||Names of individual owners.||Names of the individual owners.||Names of the individual owners.||Names of the individual owners.||Name of the partnership.||Name of the trustee, “as trustee”.|
|Possession||Equal right.||Equal right.||Equal right.||Equal right.||According to partnership agreement.||According to trust agreement.|
|Conveyance||Both parties must join in a conveyance.||Both parties must join in a conveyance.||Conveyrance by one co-owner breaks the joint tenancy.||Each co-owner’s interest may be conveyered seperately.||Any general partner authorized by the partnership agreement may convey.||Trustee may convey pursuant to the trust agreement.|
|Death||Decedent’s 1/2 interest passes to survivor unless devised by a will.||Decedent’s 1/2 interest passes to survivor.||Decedent’s interest passes to the survivor(s).||Decedent’s interest passes to decedent’s estate.||Partnership agreement provides for either termination or continuance of partnership.||Trust agreement usually provides for distribution upon death of the settlor.|
|Tenancy in common between devisee and survivor results.||Survivor owns the entire interest.||Last survivor owns the entire interest.||Devisees or heirs become tenants in common.||Heirs or devisees have rights in the partnership interest but not in the specific property.||Trust agreement usually provides for distribution upon death of the settlor.|
|Community property is liable for the debts of either party incurred before or during the marriage or domestic partnership.||Community property is liable for the debts of either party incurred before or during the marriage or domestic partnership.||Co-owner’s interest may be sold at an execution sale to satisfy the co-owner’s judgment creditor.||Co-owner’s interest may be sold at an execution sale to satisfy the co-owner’s judgment creditor.||Only a partner’s right to receive profits can be executed upon by the partner’s judgment creditor.||Usually, a creditor cannot execute on a beneficiary interest.|
Once you determine how you would like title to vest, you also need to tell Title and Escrow how that vesting should appear on the Deed. This can be confusing, especially if marital status changes. Here are a few rules to remember.
- If you have never been married:
- John Doe, a single man.
- Jane Doe, a single woman.
- If you have been married and are legally divorced:
- John Doe, an unmarried man.
- Jane Doe, an unmarried woman.
- If you are married, but taking title as your sole and separate property:Community Property – Property acquired by husband and wife, or either during marriage, other than by gift, bequest, devise, descent or as the separate property of either is presumed community property.
- John Doe, a married man, as his sole and separate property.
- Jane Doe, a married woman, as her sole and separate property.
- NOTE: In this situation, your spouse will generally have to consent and relinquish all right, title and interest in the property by deed or other agreement.
- John Doe and Mary Doe, husband and wife, as community property.
- John Doe and Mary Doe, husband and wife.
- John Doe, a married man.
- Joint Tenancy – Joint and equal interests in land owned by two or more individuals created under a single instrument with right of survivorship.
- John Doe and Mary Doe, husband and wife, as joint tenants.
- Tenancy in Common – Under tenancy in common, the co-owners own undivided interests; but unlike joint tenancy, these interests need not be equal in quantity and may arise at different times. There is no right of survivorship; each tenant owns an interest, which on his or her death vests in his or her heirs or devisee.
- John Doe, a single man, as to an undivided ¾ the interest, and George Smith, a single man as to an undivided 1/4th interest, as tenants in common.
- Trust – Title to real property in California may be held in trust. The trustee of the trust holds title pursuant to the terms of the trust for the benefit of the trustor/beneficiary.
Source: Fidelity National Title
Again, the information contained on this page is for informational purposes only and describe only common ways of taking title in California. We recommend that you contact your attorney or tax advisor with specific questions about how you should actually take title to your property.