What is title insurance?

Title Insurance protects residential and commercial real estate owners and lenders from certain hidden title risks and adverse interests the owners/lenders incur for a loss or damage suffered because of an undisclosed lien or other matter that affects the property as of the date of the policy.

What are some examples of hidden risks covered by title insurance?

  1. Forged deeds
  2. Fraud
  3. Voidable documents
  4. Unknown heirs
  5. Errors in the public record

Is title insurance needed?

Yes! Purchasing your home or business is one of the largest purchases of your life. Without title insurance you could lose all your financial assets accumulated in your lifetime, such as the equity in your home or the amount you borrowed to buy your house.

What are the two main types of title insurance policies?

  1. Owner's policy - This policy insures the new homebuyer that title is vested in them, that there are no defects or encumbrances on the property, that there is marketable title to the property, and that there is legal access to and from the property.
  2. Lender's policy - This policy insures the lender that their mortgage is a priority lien over claims that others may have on the property.

What are the main protections offered by title insurance?

  1. Indemnifications against losses.
  2. Payments of legal fees in defense of a claim against the property.

What items are needed at the closing?

  1. All parties should bring a valid picture I.D. issued by a state or the U.S. Government. Foreign passports cannot be accepted.
  2. Buyers should bring insurance binder and proof of payment of homeowner's insurance or the invoice if it has not been paid.
  3. Buyers should also bring in a cashier's check or official bank check, made payable to Allied Capital Title, for the balance needed to purchase the property. Pursuant to the Good Funds Law: (A) For Illinois Good funds: Pursuant to the "Good Funds" section of the Title Insurance Act (215 ILCS 155/26): Funds received from any party to the transaction up to $1,000 may be in the form of a personal check, certified funds or wired; funds over $1,000 and up to $49,999 must be in the form of certified funds or wired; funds of $50,000 or more must be wired. (B) For Indiana Good funds: Pursuant to I.C. 27-7-3.7, the State of Indiana requires Good Funds for real estate transactions: Funds received from any party to the transaction up to $9,999 may be in the form of an irrevocable wire transfer, cashier’s check, certified check, check drawn on the escrow account of another closing agent, or check drawn on the trust account of a licensed real estate broker or other forms of Good Funds as referenced in I.C. 27-7-3.7. Personal checks may be accepted as provided under I.C. 27-7-3.7. Funds received from any party in an amount of $10,000 or more must be in the form of irrevocable wire transfer.
  4. A current payoff letter for all mortgages the sellers have on the property.
  5. A deed and property transfer tax form necessary to convey the property from the sellers to the buyers.
  6. The original pest inspection report.
  7. Any other documents necessary to convey and receive marketable title to the property.

What is the settlement statement?

The settlement statement (often called the HUD-1 or the closing statement) lists the entire financial transaction from the buyers' and sellers' point of view. It will list debits (a charge or expense) and credits (an amount entered in a person's favor). When the buyers' debits and credits are totaled, the credits are subtracted from the debits and the difference is the cash the buyer must bring to the closing.

How may I hold title to real estate in Illinois?

  1. If only one person will be going into title, then title is held in severalty or solely.
  2. If two or more people will be holding title, then:
    1. Tenants in Common. There is no survivorship aspect, i.e., when one tenant in common dies, that share will pass under their will or by law (intestate succession) if there is no will. The surviving tenant(s) in common do NOT receive the deceased's share of the real estate.
    2. Joint Tenancy. This has survivorship aspects. When one joint tenant dies, the surviving joint tenant receives the deceased joint tenant's interest in the real estate (by operation of law).
    3. Tenants by the Entirety. This also has survivorship aspects AND limited protection against creditors. This is only available to husband and wife for their homestead property (property they live in). When one dies, the survivor automatically receives the entire property by operation of law. Additionally, while both husband and wife are alive, a judgment creditor of only one of the spouses cannot enforce their judgment lien against the property (except for an IRS federal revenue lien).