DC Real Estate Title Insurance
What is title insurance and how does it benefit you? Are buyers required to obtain it? Let’s delve into it.
What Is Title Insurance?
A Washington DC title insurance policy is a ‘contract of indemnity’ that agrees to pay for losses up to the face amount of the policy under the following circumstances; if the state of the title is different than is set out in the policy, and if the insured suffers a loss as a result of the difference.
Your title company’s policy insurance is guaranteed by its underwriter.
Home buyers can be at risk for serious financial loss due to title defects. U.S. law recognizes many rights, claims, interests and encumbrances for real property. The CFPB says: “Legal claims could come from a previous owner’s failure to pay taxes, or from contractors who say they were not paid for work done on the home before you purchased it.”
Title insurance identifies issues with the title the seller can legally convey, along with the rights and interests of all other parties relating to the property.
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Who Must Buy Title Insurance?
Lender Policy
If you’re financing a property, your lender will require lender’s title policy coverage.
Owner Policy
Owner’s title policy coverage is optional to the buyer.
Types Of Owner Policies
Standard Owner’s Policy
This policy protects your property rights and investment against pre-existing, hidden title defects (forged deeds, unknown liens, clerical errors, etc.) that occurred before the date the deed was recorded. Coverage lasts for as long as you or your heirs hold an interest in the property;
Enhanced Policy
As its name implies, this policy provides greater protection for all losses indicated in the standard policy and many additional risks, including forgeries perpetrated after the policy’s issuance, zoning violations and building permit violations. Coverage value is also typically increased automatically during the first few years.
Buyers should discuss these policies with the title company to decide which, if any, policy type they prefer.
Who Chooses The Title Company?
The Real Estate Settlement Procedures Act (RESPA) Section 9 Title Company Selection prohibits a seller from forcing a buyer to purchase title insurance from a particular title insurance company as a condition of sale under the specified conditions. The section states:
(a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company;
(b) Any seller who violates the provisions of subsection (a) shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.
*See “Federally related mortgage loan”
The seller may, in most situations, condition the sale of property on the use of a particular title insurance company if the seller purchases and pays for the entire cost of title insurance (owner’s and lender’s policies);
Sellers are prohibited from “directly or indirectly” conditioning the sale on buyer’s purchase of title insurance from a specific company. “Directly or Indirectly” means transactions which result in the seller recovering the cost for the title insurance through some otherwise seemingly unrelated fee or charge;
In order for Section 9 to apply, the use of a particular title insurance company must be a true condition of sale. There are various interpretations of this clause. Some legal experts support the interpretation hat the buyer can be rewarded by using seller’s preferred title company, or penalized for not using seller’s preferred title company (as is common in developer contracts for new construction).
“Section 9 of RESPA prohibits a seller from requiring the use of a particular title insurance company when the buyer will pay for the title insurance. This prohibition applies to any seller, whether a private individual, a home builder, or a lender with REO properties. This prohibition also applies only when the buyer will pay for the cost of title insurance. If a seller were to pay the full cost of title insurance on the buyer’s behalf, the seller could require that the title insurance be issued by a particular company. Finally, this prohibition only applies to title insurance. It does not prohibit a seller, for instance, from requiring a buyer to pay for a particular third-party short sale negotiator, as long as that negotiator is not also the company issuing title insurance or the seller’s affiliate company. It also does not prohibit a seller from requiring a buyer to use a particular settlement or escrow company, as long as the settlement agent does not control the issuance of title insurance and is not the seller’s affiliate company.” ---NAR
Title-Related Research You Can Conduct Yourself
While it is no replacement for a professional title search and policy, there is some research you can perform yourself if you have particular questions.
Conduct Plat Map Research
Historic real estate atlases, or “plat” maps, show the footprints of each building extant in the city at the time the atlas was published. The Washingtoniana Map Collection includes atlases published by Hopkins (1877-1890s) and Baist (1903-67). Some early Baist atlases (1903-1919) have been digitized by the Library of Congress and are available online. Atlases are arranged by volume for different parts of the city. Plat maps convey basic information about a property such as lot dimensions, building dimensions and material. These maps also can help you note old lot numbers, old street names, and old subdivision names. Studying maps over time gives a sense of the gradual development of the neighborhood surrounding your home, and shows what existed before your home was built. You can also look for changes to the shape of the footprint to investigate alterations made to the home.
Find The Original Permit to Build
The Washingtoniana Collection (DC Public Library) has microfilm of building permits from the National Archives collection, all permits issued from 1877-1949. The most important permit to find is the “Permit to Build,” and the best way to find that permit is to search the Building Permits Database (now available online at HistoryQuest DC). The database includes most of the information from the original permit, including date of construction, architect, builder, owner, materials, dimensions, cost and use of the building. Permits issued after 1949 are available at the D.C. Archives. You may also choose to look at the permit as it was originally issued, by consulting the building permits on microfilm. The original permit may include additional information not found in the database, such as plat drawings or inspector reports. If the permit has the note “plans on file,” the plans for the property are available at National Archives in College Park
Find other Permits
There may be other permits associated with a property in addition to the Permit to Build, such as permits to renovate, to build an addition or a garage, to add additional stories or a new facade, etc. These permits can be accessed using the microfilm indexes: By Square Number 1877-1928 By Subdivision 1877-1908 (for property in Washington County — above Boundary St./Florida Ave. — east of Anacostia River; consult plat maps for subdivision names) By Street Address 1928-1958. For recent or current DCRA permit research, try DC SCOUT.
Research Ownership
The Recorder of Deeds has a database that traces transfers in ownership of a property from 1921 to the present. Other resources for researching ownership are the Washington Board of Realtors Transaction Fiche (1920s – 1980s) and the Assessment Directories (1886-present). All of the above are organized by square and lot.
Visit Other Local Institutions for Further Research
D.C. Archives
D.C. Historic Preservation Office
D.C. Recorder of Deeds
Historical Society of Washington
Library of Congress
National Archives
Updates And Other Links
Real Estate Settlement Procedures Act: Revised Comptroller’s Handbook Booklet and Rescissions
The RESPA Act
Code of Federal Regulations
*Additional updates may apply, buyers and sellers are encouraged to do their own due diligence.
Read More About Title Insurance
CFPB on owners title insurance
Bankrate on title insurance
Nerdwallet on title insurance