Title insurance is coverage of your ownership in a property, and legal assistance if that ownership is challenged. This could happen due to a boundary dispute from conflicting surveys. It could also be about an adjoining property owner places a fence or other encroachment on your property, crossing a boundary line. There are a number of other ways, including unknown liens, to threaten real estate ownership, and title insurance is there to protect your interests.
Early in the transaction closing process, not long after a contract for purchase is agreed to, a title insurance binder (or commitment) will be issued by the title company. This document binds the insurer to issue you coverage at closing. However, there will be a section titled "Requirements." These are contingencies that must be satisfied before the policy will be issued. They generally are just procedural, and not a threat to the deal. But, they must be satisfied by closing.
- All liens and mortgages must be paid off, except the new one for the buyer.
- Any taxes due must be prorated and paid through the closing date.
- Any municipal and utility bills, such as water and sewer, must be paid through the closing date.
- If there has been a divorce, the seller's ex-spouse may be required to sign a quit-claim deed or other document declaring no interest in ownership.
- If the property is part of an estate, a death certificate will be required.
- A survey or Improvement Location Report will probably be required to show boundaries, structure locations and any encroachments.
There are other requirements that may be in the binder, but they help to protect the buyer's interests, and they are usually just handled as a matter of course in the process.