The Birth of Land Title Insurance: 1876
In 1868, in Philadelphia, a transaction was consummated which demonstrated
very forcefully the necessity of having some further type of protection
than there mere examination of the records. This very transaction
can be traced to reveal the coming into existence of the land title
insurance industry.
All the facts are to be found in the Pennsylvania Supreme Court
case of Watson vs. Muirhead, 57 Pa 161.
In this case, a conveyancer conducted a title search and disclosed
the existence of a judgment. He noted the judgment and turned the
abstract over to a well-qualified attorney for a legal opinion as
to the effect of the judgment. The attorney advised that the judgment
was not a valid lien on the property and, based on the information,
the purchaser completed the deal.
Shortly afterward, execution was issued on the judgment and the
property was sold at Sheriff's Sale. There was some later litigation
and the courts held that the judgment was a valid lien and the Sheriff's
Sale was good.
As a result of the loss incurred in this transaction, for which
the attorney and the conveyancer were held not liable, a group of
individuals interested in the law of real estate decided that something
should be done to protect innocent investors from such similar hazards.
TITLE INSURANCE OVERVIEW
The title insurance industry has been protecting the American dream
of homeownership for more than 125 years. Real estate property is
the nation’s largest asset, and the 1990s was one of the best
decades in American history for housing. The behind-the-scenes work
of title companies ensures the quick and secure transfer of land,
fostering lender and consumer confidence in their real estate investments.
The objective of title insurance remains the same as it has always
been – helping the parties in real estate transactions to
determine their rights and interests, and assuring that land transfer
is expeditious and secure. Protecting the parties involved in real
estate transactions is the reason the title insurance product was
developed.
In this country, matters affecting ownership and other real estate
interests are entered in public records. Before a transaction is
completed, a title search of the records is made in an effort to
locate potential problems so that they can be rectified and the
transfer can proceed.
While most problems can be located in a title search by skilled
professionals, there can be hidden hazards that even the most thorough
search will not reveal. Examples include forgeries in the chain
of title, a claim by a previously undisclosed relative of a former
owner, or a mistake in the records. Liens, easements, rights-of-way,
life estates, air and subsurface rights, and future interests are
also found in a title search.
Title insurance is substantially different than other types of insurance
coverage, which can often lead to a misunderstanding of the product.
Title insurance emphasizes risk prevention rather than risk assumption.
This emphasis on risk prevention is a labor intensive and costly
component of doing business, but the coverage offers the best possible
opportunity for avoiding claims and losses in real estate transactions.
During the title search, title companies find and fix problems with
the title in 25 percent of transactions – usually unbeknownst
to the consumer or lender. In addition, title companies pay millions
of dollars each year in claims.
When a property is resold quickly, or refinanced within a short
period of time from the original purchase or most recent refinance,
a new title search and title policy are needed. The owner/seller
may have created or experienced claims, liens or other encumbrances
since the original policy was issued, and the lender will require
a new title search to ensure that the title is clear. For instance,
the owner may have taken out a second mortgage, incurred a mechanic’s
lien or a lien from unpaid taxes.
The American Land Title Association, the national trade
association for the title industry, was founded in 1907 and currently
represents 2,000 abstracters, title insurance agents, and title
insurance underwriting companies.
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Contact Information
Titles Unlimited Inc.
7925 SW 24th Street
Miami, Florida 33155
305.447.1107 office
305.398.3331 fax
305.398.3332 alt fax
786.513.3106 efax
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