Patty Manzi’s Tri-Valley Real Estate Blog

So you’ve decided to enter the wonderful world of Pleasanton Real Estate and buy a home!  Your agent writes a purchase contract for you which includes a box checked that says “Buyer shall pay for owner’s title insurance policy specified in paragraph 12E.”  What exactly does this mean?

Title insurers, unlike home & auto insurance companies, operate under the theory of risk elimination.  Title companies spend a high percentage of their operating income collecting, storing, maintaining and analyzing official records for information that affect title to real property.  This is needed to identify the rights that others may have in your property, such as recorded liens, legal actions, disputed interests, rights of way or other encumbrances on your title.  Before closing the purchase transaction, the title company will proceed to clear those encumbrances which you do not wish to assume.

Most other insurance companies (medical, casualty) base their rates and anticipated losses on studies and the premiums are pooled on the assumption that a certain number of claims will be made.  Premiums are paid to insure against an unpredictable future event, and premiums are collected on a regular renewal basis.  Title insurance premiums are paid to identify and eliminate potential risks and claims beforethey happen.  Title insurance involves a one-time premium paid when you close a real estate transaction.

The title company will conduct a thorough search and evaluation of public records to insure that no claims ever arise.  However, human error can occur and legal interpretations make 100% risk elimination impossible.  If a claim does arise, a professional will be assigned to handle the claim according the the title insurance policy.

A library of title records are maintained in facilities knows as title ‘plants’.  These plants house records that can date back to over a hundred years.  Each day recorded documents that affect real property and property owners are posted to the title plants.  When a title search on a particular property is requested, the information is organized for quick and accurate retrieval.  In California, records in most large counties have been converted to computer-based title plant systems which provide retrieval from remote locations.  This allows faster delivery of the title search results to the customer.  This investment in skilled personnel and advanced data processing represents a major part of the title insurance premium dollar. 

That is where most of your dollar goes and that is the source of your protection and pease of mind as a homeowner.