Title Insurance

Title Insurance payment is once for the term of the policy, and in effect until the property is resold or refinanced. 

Disruption in real estate market never stops, however everything has its own origin, “Title Insurance” is a kind of protection for the new owner interest, as well as the finance provider. The origins of “Title Insurance” are obligated lands, fraudulent or semi-fraudulent land sale. Well, too many buzzwords until now, we will simplify it by few examples.

Example 1:

A real estate agent approached an investor with large land to purchase for investment, the investor carry out his due diligence work and found everything about the land is fine; it is a great opportunity to invest some money on it. The land is 5000 hectare (50 SQ KM), with substantially low price compared to the nearby smaller sized lands.  Title deed is genuine; the property registered in land department with the correct current owner name, the owner is genuine seller and looking to cash out his old investment. The targeted investor inquired other appraisers and they confirmed the price is a deal, no any single person raised a concern about the price, or the land, deal carried out without issues to the new property owner.
After few years, National Register of Historic Places or UNESCO is under nomination process.

Example 2:

Whereas “Title Insurance” mostly used in the US and widely used these days, it worth mentioning another example from different area of the world; a situation that I have witnessed during my consulting work with the banks in Iraq.
After US invasion to Iraq in 2003 (or as politicians name it Operation Iraqi Freedom), and withdrawn the previous regime, Iraq went into chaos and lose of central government control. People started to migrate from several regions in the country to the capital Baghdad; many of those people were not able to own or rent places to live in; they started to occupy any empty place and built small houses to live in. This action is nevertheless other than infringement of government and private property. Suddenly local politicians found themselves in difficult situation to manage, and the elected parliament voted against evacuating those infringers. 
In such country where insurance as a term is not in people mind by any mean including local investors, international investors should seek “Title Insurance” with a lot more protection controls on the ground whenever they decide to invest in Iraq.

Example 3:

The typical example of “Title Insurance” usage nowadays is to ensure the value of a property at acquisition time, which has developed after 2008 world financial crises as indirect mandatory policy for lenders to protect their interest in the collateral of loans.
A person will acquire certain real estate property with specific price and with certified appraisal from Good Faith Estimate agency at the time of purchase process. Several years later, severe economic conditions forces degradation to the value of real estate property, the owner default in payment and the lender faces new reality of defaulted loan and devaluated real estate property.

Example 4:

Gap coverage is also another cover by “Title Insurance” to protect new owner interest during the registration process time. An accident of water leakage in a property could cause mass amount of money to be borne by the new owner.

Final words

Title insurance is required to protect the interest of all parties in the sale-purchase process of real estate property, the seller, the buyer, and the lender.

Author: Jawad Alalawi
Banking and Technology Information Security Consultant

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