Title insurance often more complicated than it seems

Buying a home can be one of the most exciting, stressful, fun, painstaking and confusing times of a person's life. The details of the move, the new financing, the changes to the house there are too many things to keep track of. As a result, people tend to forget about the little aspects of the closing process.

And who can really blame them? In the excitement of the move, items like how your title insurance policy looks is one of those details people don't have time for.

But when a claim or issue comes up, such as a property line dispute or a fence encroachment, the title policy suddenly becomes very important.

The title insurance policy has many aspects to it. There is a list of different coverages that can be part of the policy, including mechanic's lien coverage, survey coverage, lender's coverage and many different types of endorsements which affect the coverage.

Endorsements which can accompany the title policy include the zoning endorsement, access endorsement, contiguity endorsement and many others. The point is the title insurance policy is not as simple as some might think.

One particular coverage of interest is survey coverage. It's one of our most highly requested additional title coverages.

Survey coverage is given on two different types of title policies. The most requested and granted survey coverage is on our lender's title policies.

When a financial institution makes a mortgage loan, at least 80 percent of the time it requests the survey exception be removed from the title policy.

Removing the exception provides the lender with survey coverage, however that coverage does not extend to the borrower in all cases.

Specifically, the lender wants us to remove the phrases from the title insurance policy that exempt from coverage:

a. Any discrepancies or conflicts in boundary lines, any shortages in area, or any encroachment or overlapping of improvements.

b. Any facts, rights, interests or claims which are not shown by the public record but which could be ascertained by an accurate survey of the land or by making inquiry of persons in possession thereof.

c. Easements, liens or encumbrances, or claims thereof, which are not shown by the public record.

In the last couple of years, the local custom among title companies was to remove these items at the lender's request. These items would be removed without a survey, even on new construction. The thought in the title industry was it would be a risk worth taking.

Meanwhile, lenders and Realtors often recommend that a survey not be done to reduce buyer costs. As you might guess, the customer saves money by not having the survey prepared, but it does the customer no favor.

Surveys in this market have always been reasonably priced, and with all of the required setback requirements and dedicated easements on plats, there may be potential for any number of encroachments which could affect the resale value in the future.

The lender is protected by having removed the survey exception from the title policy, but the customer who does not have a survey performed may have to live with the consequences of future complications, such as property line disputes.

By cutting costs and not having the survey done, the customer might not ever know there is a defect until he or she wants to resell the property, when it's too late.

Surveys are a nice complement to your title policy.

So next time your lender or your Realtor suggests you save $200 or less by not having a survey done, tell them you would like to know where and how your improvements affect your real property ownership, and ask your local title insurance agent about the possibility of additional title coverage.

(M. Keith Chaffin is vice president of Hogan Land Title Co.)