REI 4413 1st Edition Exam 3 Study Guide Title and Insurance During the interval between the signing of a real estate contract and the closing three important activities usually take place 1 The seller must prove that she has title to the real estate under the contractually established standard Title and Insurance During the interval between the signing 2 The buyer makes arrangements for property and liability insurance 3 The buyer borrows money to finance the purchase Title Title The right to possess real estate as evidenced by a historical record A buyer can acquire such rights to real estate only as the seller has the power to convey Title Recording Statutes Recording Defined Recording The act of placing in the public record documents that give the world notice of the information therein Constructive Notice Notice imputed to a person by law due to its existence in the public records whether the person has actually inspected the public records or not Title Recording Statutes cont d Recording Defined cont d Actual Notice Title information that is acquired personally by someone Inquiry Notice Notice of facts that create a duty to inquire further whether unrecorded interests exist Title These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Recording Statutes cont d The Common Law Approach Recording Statutes State statutes that govern the manner in which documents are recorded in the public record and the effect such recording has on subsequent purchasers creditors mortgagees and other parties who may have an interest in the property Title Recording Statutes cont d The Common Law Approach cont d Before recording statutes were enacted the common law rule was simple and easy to apply the first deed prevails over later deeds Title Recording Statutes cont d Types of Statutes Three types of recording statutes have been acted by various states The first two Notice and Race Notice statutes protect the bona fide purchaser Bona Fide Purchaser A good faith purchaser who pays value and is without notice either actual or constructive of a prior adverse claim Title Recording Statutes cont d The Notice Statute Under a notice recording statute an unrecorded conveyance is not valid against later bona fide purchasers The Race Notice Statute Under a race notice statute a later purchaser not only must be bona fide but also must record the deed before other purchasers Title Recording Statutes cont d The Race Statute Under the 3rd kind of notice a pure race statute the first to record wins The purchaser need not be bona fide or without notice Electronic Recording With the widespread prevalence of computers and electronic transactions it is only a matter of time before real estate conveyances also will be recorded electronically Recording Statute Requirements Title Recording Statutes cont d Chain of Title A record of successive conveyances or other forms of alienation affecting a particular parcel of land that are arranged consecutively from the government or original source of title down to the present holder Title Recording Statutes cont d Chain of Title cont d Grantor Grantee Index A land records system in which conveyances of interests in real property are indexed in two separate indices first alphabetically according to the grantor s surname and then alphabetically according to the grantee s surname Deed Outside the Chain of Title Grantor and Grantee Indexes Grantor and Grantee Indexes cont d Title Recording Statutes cont d Chain of Title cont d Tract Index A land records system in which conveyances of interests in real property are indexed geographically by tracts Title Proof of Title It is common practice to obtain a professional determination of whether the sellers have good title Three methods used to make this determination Title Proof of Title cont d Abstract and Opinion The first method combines the use of an abstract of title and a legal opinion Abstract of Title A compilation of the chain of title usually prepared by a title company or an attorney providing copies or summaries of all recorded instruments including deeds mortgages mortgage discharges and tax liens Title Proof of Title cont d Abstract and Opinion cont d Title Opinion A written statement from an attorney which gives an analysis of the title search regarding the current ownership rights in the property It states whether there is any kind of lien or cloud in the title to the property Title Proof of Title cont d Abstract and Opinion cont d Certificate of Title A statement of opinion by an attorney that describes the state of the title to a parcel of land Slander of Title Occurs when one publishes information which is untrue and disparaging to another s property interests in land that can result in the impairment of its marketability Title Examination Information Generally Not Found in the Grantor Grantee Index Title Proof of Title cont d Title Insurance Insurance designed to indemnify a landowner for losses from defects in the title or liens against the land Mortgage Title Insurance Policy Insurance that protects the lender against loss or damage resulting from defects in the title or the enforcement of liens against the land Title Proof of Title cont d Title Insurance cont d Owner s Title Insurance Policy Insurance that protects the purchaser borrower s equity against loss or damage resulting from defects in the title or from the enforcement of liens against the land Title Proof of Title cont d Title Insurance cont d Simultaneous Issue Discount Discount in the premium price paid by the purchaser borrow for buying both a mortgagee and an owner s title insurance policy Title Proof of Title cont d Title Insurance cont d Title Commitment A letter from a title insurance company in which it commits to issuing a title insurance policy on the insured subject to certain conditions and requirements Action to Quiet Title An action compelling someone to establish his claim of an interest in land or forever be estopped from asserting it Title Proof of Title cont d Title Insurance cont d Exclusions Exceptions Certain potential defects or liens against a title to land that are excluded from coverage in a title insurance policy Title Proof of Title cont d Title Insurance cont d Exclusions Exceptions cont d Four general types of exclusions are common 1 Policies exclude coverage for losses resulting from governmental regulation of the property 2