It's not unusual for a client who just recently bought or refinanced their property (like even just a month or two ago) to be back in my office for another real estate closing because they're either flipping that property or maybe refinancing their mortgage because rates came down. When we're in the closing room looking over the settlement statement for their new transaction, I occasionally get some variation of this question.
"I just bought title insurance ____ months/years ago (fill in the blank), why do I need it again. "
Answer: If you are buying a property, you want to know that the seller actually owns it, right? If you are lending money and taking back a mortgage on property as security, you want to know that the borrower actually owns the security, right? And you want some reasonable proof of that, too. So the seller or borrower says to you "I can't prove that I own the property now, but I have this title insurance policy that says I owned it as of six months ago when I did my last deal." Doesn't quite give you all the warm and fuzzy assurances you'd like does it?
A title policy only insures the title up to the date of the policy, not beyond it. When you sell or mortgage the property later (even a day later), you need to prove to the buyer or lender that you still own the property. A title company will do another search of all the public records starting from the old policy date if they have a copy. The title company makes sure that you still own the property, and that since the last policy date you haven't incurred any new liens, forgotten to pay your taxes or been sued, among dozens of other things. Then you can complete your new transaction with a new, up to date title policy.
Give the title company a copy of your old title policy when the order is placed. Don't forget to ask about any short term or reissue rate discounts that are often available. Because you were just there recently, the Title Company's job is easier. Most will reflect that in what they charge you on your new deal.
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This post is the first in what I plan to make an ongoing series of simple answers to the kinds of questions people from outside the industry often ask. If you're a realtor® or lender I hope these posts will prove helpful in explaining things to your clients. I will be tagging them as "Ask the Title Guy", so when you stop back, you'll know exactly where to look. And if you have a question you'd like me to address either leave a comment or email me directly.
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