Why do you need a title company—and what does it provide to you. The key word is protection. Title to real estate, in the simplest form, is a detailed history of past ownership of the land, showing liens, encumbrances and the rights that others may have which may affect the use of the land.

Throughout the sale and closing process the title company acts to insure that you are protected, beginning with placing the title in order and continuing through the commitment phase, closing scenario and issuance of the title insurance policy.

Once a title order is placed, the search, examination and disclosure process begins. The courthouse abstractor searches the public records and prepares a detailed brief which is translated into a title "commitment" by the title officer. This commitment advises you that the Title Company is committed to insure the property subject to certain requirements.

These requirements involve items showing the present state of the title and the removal of objections are open mortgages and taxes. Other items may involve estate questions, survey matters, superior court or county judgements, foreclosure items and bankruptcy issues. The title company assists throughout the pre-closing period in determining ways of resolving any issue appearing on the title commitment. Since most of the items appearing on the commitment are items concerning the seller of the property, the title report serves as disclosure to you in an effort to protect your interests.

At the closing table, the title company representatives (called "settlement officers" or "closers") continue to protect your interests. All title matters still of concern are resolved at the final settlement. Liens and encumbrances are listed on the settlement statement (called the "HUD-1") and paid out of the proceeds of the sale. Documents and various exhibits are accepted to clear items still appearing on the commitment. Completion of the HUD-1 and disbursement of the funds are fiduciary activities that are also provided to you by the title company. The Passing of the funds through the title company provides protection to you and reinforces faith and trust in the closing process.

After closing, little thought is given to the title company, but this is perhaps the period when the most protection is provided. With the rapid recording of documents and issuance of an Owner’s Policy of Title Insurance, you are given written protection against challenges and claims to ownership of the land.

National title insurance companies, also called title underwriters, pay out multi-millions of dollars in claims each year, protecting the ongoing ownership of land. Among the common types of claims handled are:

1) Forgeries in the chain of title previously undiscovered or claims. 2) Boundary line disputes caused by conflicting surveys, plots plans or subdivision plans (a common claim in South Jersey). 3) Inaccurate lien payoff information. 4) Courthouse errors resulting in missed liens. 5) "Gap" liens---those that get recorded after settlement, but prior to the insured deed. 6) Violations of setbacks and restrictions. 7) Previously undisclosed heirs. 8) Competency issues. And last but not least, 9) Fraud.

All Mortgage lenders require that buyers have a title policy—made payable to the lender—to cover the loan amount. But most do not require a second policy to protect the buyer.

Still, it might be a good idea to buy that second policy, according to some experts. Under certain conditions, a lender’s policy may not protect the owner from losses.

The lender’s policy given the lender first claim to any money collected from title insurance, even though the buyer pays for the policy. The lender’s policy usually is for the amount of the loan, and the coverage decreases as the mortgage is paid off.