Here is a tale of a real estate urban legend meant to help explain what abstracting is. Enjoy!!!

A New Orleans lawyer sought an FHA loan for a client. He was told the loan
would be granted if he could prove satisfactory title to a parcel of
property being offered as collateral. The title to the property dated back
to 1803, which took the Lawyer three months to track down. After sending the
information to the FHA, he received the following reply:

(Letter)
"Upon review of your letter adjoining your client's loan application, we
note that the request is supported by an Abstract of Title. While we
compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin."

Annoyed, the lawyer responded as follows:

"Your letter regarding title in Case No. 189156 has been received. I note
that you wish to have title extended further than the 194 years covered by
the present application. I was unaware that any educated person in this
country, particularly those working in the property area, would not know
that Louisiana was purchased, by the U.S., from France in 1803, the year of
origin identified in our application. For the edification of uninformed FHA
bureaucrats, the title to the land prior to U.S. ownership was obtained from
France, which had acquired it by Right of Conquest from Spain. The land came
into the possession of Spain by Right of Discovery made in the year 1492 by
a sea captain named Christopher Columbus, who had been granted the privilege
of seeking a new route to India by the Spanish monarch, Isabella. The good
queen, Isabella, being a pious woman and almost as careful about titles as
the FHA, took the precaution of securing the blessing of the Pope before she
sold her jewels to finance Columbus' expedition. Now the Pope, as I'm sure
you may know, is the emissary of Jesus Christ, the Son of God, and God, it is
commonly accepted, created this world. Therefore, I believe it is safe to
presume that God also made that part of the world called Louisiana.God, therefore,
would be the owner of origin and His origins date back, to
before the beginning of time, the world as we know it AND the FHA. I hope
you find God's original claim to be satisfactory. Now, may we have our loan?"

The loan was approved.

Most folks have no clue as to why they should buy it and/or why their lender requires it. In most states title insurance is your only option when insuring a clear title to the real estate you are about to buy.  (Although, here in Oklahoma an attorney's opinion of title is still used.) Title insurance is something you don't appreciate until you need it. Title insurance policies vary in coverages and offer various endorsements depending on your specific needs. You need to consult with a title attorney in regards to which coverages are best suited, needed and required to your transaction. This post is in laymans terms and for general informational purposes only.

Think of title insurance like any other insurance policy. Title insurance, insures your right to ownership. It has limits of coverages (typically purchase price), exceptions not covered (similiar to flooding on your homeowners) and additional endorsements (such as jewelry on your homeowners). Why title insurance? Because, transferring title (deed) on a property is not just as simple as signing the back of an auto title. A lot is at stake in real property including legal precedence in regards to rightful owners. If a 'cloud' on title is created at anytime during the chain of transferrences it becomes a non-marketable title. What is a non-marketable title? A title that has had a 'cloud' created on it as a result of improper and/or legal right of transferring ownership. Clouds can be created in all sorts of ways during and prior to your purchase that can make your ownership invalidated, such as:

1. undisclosed heirs claiming rights and interests from previous owner (ie: Uncle Bob left me this property 50 years ago and it's not yours)
2. duress in execution of instruments conveying title previously  (ie: last minute will changes)
3. rights of divorced parties (ie: he had no legal right to sell you this property behind my back)
4. inaccurate legal property descriptions/boundaries (ie: neighbor claims part of your land is really his land)

The list goes on and on of possible 'clouds' on title getting created. Title insurance protects you against claims from outside parties claiming interest to the property. If a court rules does rule in the favor of the outside interest, and you are out without title insurance, you will be out of ownership and money. 

Once you purchase a home along with title insurance, put the policy some where safe. It's a one time pay and stays in effect during the course of your ownership so there are no renewels of premiums. Find a reputable title company and ensure your right to title.

, This blog and website is presented for informational purposes only. It is my/our opinion and perspective of this business and does not constitute any form of a legal relationship or contract between you and I or S. Walker & Co. I/We are not an attorney, CPA, engineer, architect, chemist or any professional that requires a degree and licensing we do not have. I/We are a licensed real estate broker and brokerage firm in the state of Oklahoma. Never disregard or delay seeking legal, tax and/or other expert professional counsel to your specific transaction or situation because of something you read on the internet.  Legal, tax, engineering, construction and industry standards vary state by state in regards to real estate. I make reasonable effort to present current and accurate information but I make no guarantees of any kind. Any links to external websites is provided as a courtesy and is not an endorsement or guarantee of product, service or information.

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