Title Insurance and What You Actually Own at Closing

Two confusing processes happen near the end of your purchase: the title search and title insurance, and the closing itself. Here’s what actually happens.

What Is Title?

Title is the legal right to own a property. “Clear title” means no one else has an unresolved claim on it.

Title problems can include:

• Unpaid liens (a contractor who was never paid)
• Tax liens (back taxes owed)
• Claims from a co-owner or heir who never signed off on a prior sale
• Forged or improperly signed deeds in the chain of title
• Recording errors in public records

These are uncommon, but they can be expensive if they surface after you own the home.

Title Insurance: Your Protection

Title insurance is a one-time policy, paid at closing, that protects against covered title problems that existed before you bought.

There are two kinds:

• Lender’s policy: required by your lender, protects the lender’s interest
• Owner’s policy: optional, protects you. I recommend it.

Cost: Premiums are based on the purchase price and loan amount. Your settlement agent can quote the exact cost, and it appears on your Loan Estimate and Closing Disclosure.

What it typically covers:

• Someone claims prior ownership rights
• Unknown liens that existed before closing
• Fraud or forgery in past transfers
• Errors in public records

What it typically doesn’t cover:

• Problems you created or agreed to
• Zoning and land use issues (in most standard policies)
• Environmental issues
• Matters listed as exceptions in your policy (read them)

How it works:

• The title company or settlement agent searches public records before closing
• They report what they find, and problems are cleared before closing when possible
• The policy is issued at closing
• An owner’s policy lasts as long as you (or your heirs) own the property, with no renewal
• If a covered claim arises later, the insurer defends your title or pays the covered loss

The Closing Process

Closing (often called “settlement” in Virginia) is where the handoff happens.

Where: At the settlement agent’s office, or sometimes split, with each side signing separately

Who may be there:

• You (the buyer)
• The seller (often signs separately)
• The settlement agent (conducts the closing)
• Real estate agents (sometimes)

What you do:

1. Review the Closing Disclosure (final costs and loan terms)
2. Sign the promissory note (your promise to repay the loan)
3. Sign the deed of trust (secures the loan with the property)
4. The seller signs the deed transferring the property to you
5. Your funds for the down payment and closing costs are delivered, usually by wire
6. After the deed is recorded and funds are disbursed, you get the keys

Documents: Expect a stack of documents. The settlement agent will explain each one.

Sample timeline:

• You must receive your Closing Disclosure at least 3 business days before closing
• You confirm wiring instructions by phone with your settlement agent, using a number you already know is legitimate (wire fraud is a real risk)
• Closing day: sign, fund, and get the keys

Title Search vs. Title Insurance

Title search:

• A review of public records for the property
• Reports whether title is clear and lists any liens or issues

Title insurance:

• A one-time policy based on the search results
• Protects against covered problems the search didn’t catch
• No renewal

Key Takeaways

• Title is your legal right to own the property
• The title search finds problems; title insurance protects against the ones it missed
• Your lender requires a lender’s policy; an owner’s policy protects you and is optional
• You’ll receive your Closing Disclosure at least 3 business days before closing
• Verify wiring instructions by phone before you send money

Questions before closing? Call me at (540) 246-9067.