1. What Are Liens, Encumbrances, And Defects To The Title?

Question: What is title insurance?

Answer: Title insurance protects the homeowner's interest in their investment by providing coverage of past issues in the chain of title. These issues can include liens, encumbrances, and defects to the title of the property. The title company handling your transaction expedites the closing process by resolving such issues and allowing the sale to go smoothly.

Q: What are liens, encumbrances, and defects to the title?

A: Lien: a charge against the property for missing payments. These can be bills, taxes, payment to a contractor (mechanic lien), or a number of legal infractions.

Encumbrance: Encumbrance is a more general term for anything impeding the transfer of title of a property. Common problems are a mortgage which needs to be payed off; lis pendens, pending legal action involving the property in some way; and easements, which means another party is granted access and the use of a certain portion of the property. Easements are usually space reserved for utilities on a property which may prevent the installment of a fence or pool.
Examples of a defect, or cloud, to the title include inheritance discrepancies, foreclosures, and missing title information. For instance, an investigation into a title defect may reveal that a second person owns the property you're buying and isn't aware of the sale, or there may be some important documents missing from the initial title