By WWLT
One thing we have learned during our more than two decades in business at World Wide Land Transfer is that title insurance isn’t well understood by the general public. While you likely have heard about other types of policies like homeowner’s insurance and understand how they work, we have found that many first-time home buyers have never even heard of title insurance. World Wide Land Transfer stands out among title insurance companies in PA.
Because understanding title insurance, how it works, and the protection it provides are all crucial aspects of home ownership, our team would like to take some time to define and explain some common terms related to the title insurance industry. If you are planning on buying real estate or you already own property, we suggest familiarizing yourself with these terms so you can be more informed when you buy real estate or talk to a title agent.
These terms can be used interchangeably in the title insurance industry, and they all refer to the most basic aspect of title insurance. A title defect is any irregularity or claim attached to a real estate title that can affect a property’s ability to be legally sold. A title defect may also be referred to as an encumbrance or a “cloud” on the title. Some common examples include improperly filed documents, unpaid liens, property line disputes, and competing claims of ownership. If any of these title defects exist and show up on a title search, the current owner will be unable to legally sell the property until it is resolved.
This is the process by which title defects are discovered. When a buyer applies for a loan to buy real estate, the lender will have a title search conducted to ensure there are no title defects that could affect the borrower’s ability to repay their loan or sell the property in the future. A title search will also be conducted if a property owner decides to purchase owner’s title insurance to ensure there are no existing defects before the policy is issued.
The title search is usually conducted by a title agent at a title insurance company, and it involves searching through all publicly available records related to the property in question. This could include older deeds, tax records, bankruptcy filings, court proceedings, and more. A title search can potentially go back decades to the time when that parcel of land was originally sold.
Any money, deeds, or other documents being held by a third party until the completion of a transaction are referred to as being held “in escrow.” In real estate transactions, an escrow company will hold any funds set aside for the closing, as well as various documents and the keys to the property, in escrow until all the conditions of the closing agreement have been met. Once closing is completed, they will release funds, documents, and keys to the parties who now own them.
In some cases, part of a property can be legally used by someone other than the property owner for specific purposes. This is known as an easement, and it prevents the other party from facing any legal consequences related to their authorized use of the property. One common example is known as a utility easement, and nearly every property in America will have one. This easement allows a utility company to run pipes, electrical lines, and other utilities on or underneath a property in order to serve its customers.
They will also be allowed to enter the property for the purposes of repair and maintenance on their lines. Other common easements may allow another party to use your property to gain access to their own if it cannot be connected to local roads without crossing other properties, or to build fences that could not be constructed without crossing neighboring property lines.
A covenant is a legal agreement that limits how a property can be used. This frequently comes up in neighborhoods governed by Homeowners Associations (HOAs) that may limit a range of activities. An HOA may require houses to be painted specific colors, for example, or they may forbid the construction of outbuildings, pools, and other structures on the property. Even non-HOA properties can have covenants attached to the title, so it is important to be aware of all existing covenants before you make a real estate purchase.
A lien gives another party the legal right to collect money, and when a lien is attached to a property, it can allow a creditor to seize that property for the repayment of outstanding debts. One common example is a mortgage lien that allows a bank to seize a property and resell it if the mortgage is not paid. Other types of liens include tax liens, which are held by a federal, state, or local tax authority, and mechanic’s liens, which are held by contractors who performed work on a property. If there is a lien attached to a property, the owner will be unable to sell it until the lien is repaid.
Understanding these terms is key to making informed decisions when buying or selling property. Title insurance may not be something most people think about every day, but it plays a crucial role in protecting your ownership rights and financial investment. Whether you’re a first-time homebuyer or an experienced investor, knowing what a title defect is, how liens and easements work, and what a title search involves can help you avoid surprises at closing—and potentially save you from costly legal issues down the road.
At World Wide Land Transfer, we’re here to make the title insurance process easier to understand. If you come across a term you don’t recognize or want help interpreting a report or document, don’t hesitate to reach out. Our team has decades of experience guiding clients through real estate transactions of all sizes, and we’re always happy to answer your questions and help you feel confident in your next move. We also provide title insurance in New Jersey.
At World Wide Land Transfer, our agents use these and a range of other terms every day as we help homeowners, lenders, and more find the title insurance coverage they need. If you are one of the millions of Americans who are unfamiliar with title insurance, we will be happy to discuss coverage options with you. Call us today if you want to find out about the owner’s title insurance cost or in other communities all across America.
World Wide Land Transfer is a service-oriented PA title company with offices in Philadelphia, New York, and Washington, D.C. With a record of going above and beyond, we are trusted to close everything from complex commercial transactions to residential refinance and purchase transactions.
