Beginning July 1, New Mexicans who buy, sell, or finance a property will pay less for title insurance. Title insurance is a form of insurance that protects lenders and homebuyers from financial loss due to defects in a title to a property. Thanks to the efforts of Think New Mexico, premiums for title insurance policies will decline by 6.0 percent. Think New Mexico is a results-oriented think tank whose mission is to improve the lives of all New Mexicans, according to their website at https://www.thinknewmexico.org/. They have been advocating for New Mexico consumers since 1999.
Think New Mexico submitted comments during the most recent ratemaking process highlighting how rapidly rising home prices have increased title insurance costs for consumers, according to their press release. That’s because the cost of title insurance is determined by the value of the property or amount financed. The higher the sales price or loan amount, the higher the premium. In the past year alone, higher values increased the cost of title insurance by 13 percent. The reduction is slated to save New Mexicans throughout the state thousands of dollars in premium costs going forward.
So, what is title insurance? Unlike “regular” insurance that anticipates some future event, such as an automobile accident or sickness, title insurance insures past events, such as the transfer of titles to properties. The worst-case nightmare is when someone knocks on the door of the home you just purchased and tells you that your deed is a forgery and that they’re the actual owners of the home. Title insurance protects your interest should something like that ever occur.
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Locally, an excellent example of the genesis of a “chain of title” began with the signing of the Gadsden Purchase in 1853. The purchase of land from Mexico by the US was made to resolve a boundary dispute that resulted at the termination of the Mexican American War.
It was at that time that the 29,670 square miles of Mexican land that was the subject of the treaty became part of the United States. In essence, the treaty created a brand-new parcel of US land covering parts of Southern New Mexico and Southern Arizona. Over time the land was divided and sold, re-divided and willed, subdivided, forfeited and, in some cases, gifted to family members. While large sections of desert still belong to the Federal Government, large swaths have been subdivided numerous times and are now being sold as individual home lots.
So, who ensures that the chain of title to the property you’re purchasing is unbroken and that all of the owners who came before you – all the way back to the Gadsden Purchase – truly had the right to pass the property title along to the next owner? That responsibility falls on the shoulders of the title insurance company. Title companies can ensure that a title is “clear” because they search the public records to make sure that it is. The process is pretty straightforward.
When a title company initiates a title search, they check for liens, judgments, and other legal filings posted against the buyer, the seller, and the property being sold. The title searcher (yep, that’s his or her title) searches both the court records and the public records of the county recorder’s office in which the property is located. At the conclusion of the search, the title company will issue a title commitment outlining any requirements the parties have to meet in order for the company to ensure a clean transfer of title.
Requirements can range from the simple execution and recording of a release of an old paid-off mortgage to the disposition of legal matters that can only be resolved in court. Once all of the conditions have been met, the title company is prepared to issue a Title Insurance Policy.
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What does the title insurance policy cover? The American Land Title Association estimates that twenty-five percent of title searches find a title problem that is fixed before the insurance is issued. Occasionally and in spite of an exhaustive title search, hidden hazards can emerge after closing. Issues such as mistakes in the public record, previously undisclosed heirs claiming to own the property, forged deeds and unrecorded easements could all cloud the title. If any of these or other similar problems were to arise, the owner’s title insurance policy offers financial protection against them by negotiating with third parties and paying the legal claims and fees involved in defending the title.
What does title insurance cost? Currently, the rate for a lender policy on a $ 272,500 loan is $ 1,373. The upcoming 6% reduction will save a borrower financing that amount in the vicinity of $ 82.00. Multiply that number by the thousands of transactions closed in the state each year and one can see how the savings can quickly add up.
While the cost of insurance may still seem high, the risk of purchasing without it could be significantly higher.
See you at closing!
Gary Sandler is a full-time Realtor and President of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or Gary@GarySandler.com.
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