Q. Why do I need title insurance?

A. This is a question we are asked on a regular basis. So here are my questions to you: Would you buy a house and not purchase homeowner's insurance? Would you buy a car and not purchase auto insurance? Insuring your valuables is pretty much a given, right? So why would you not insure the title to the most valuable asset you have?

Unlike other forms of insurance, title insurance is a one-time purchase. This means you pay for the policy at the time you purchase your home. The fees are set by the Superintendent of the Department of Insurance. For a transaction with a sales price of $495,000, the title-insurance fees would currently be $2,426 for the title insurance policy and $364 to delete standard exception numbers 1-4. As a seller, if you have your existing owner's policy of title insurance, you are entitled to a reissue discount. The discount is based on the price you paid for the property when you purchased it, and the length of time since your purchase.

What are the standard exceptions? They are the pre-printed exceptions on the title commitment. By paying to delete these exceptions, you end up with the coverage. The standard exceptions primarily deal with mechanic's lien coverage, survey coverage, unrecorded assessments, and coverage for unpatented mining claims.

Title insurance ensures that you have good and marketable title to your home. Title insurance protects you (at a level depending upon the coverage purchased) against things like property boundary issues and mechanic's liens that were not a part of the public record. Title insurance gives you peace of mind that the deed you have to the property was properly conveyed.

Q. Why do I have to clear the IRS lien recorded against my name?

A. The IRS can record a lien against you individually, which then attaches to any properties that you own in the county in which the lien was recorded. In order to convey clear title, the lien must be paid off prior to or at closing. This applies to both seller and buyer. This also applies to a state tax and revenue lien. Without paying the lien off and obtaining a release that is recorded, the property cannot be properly conveyed.

Q. I own my property in an LLC. Why do I have to provide LLC documents to the title company?

A. As part of our due diligence, title companies must ensure that the entity conveying title (the seller) has the legal authority to do so. For an LLC, this requires a copy of the operating agreement and proof that the LLC is in good standing with the Secretary of State. For some entities, a resolution authorizing the sale is also required.

Deby Adinolfi (505-954-3328) is an escrow officer for Stewart Santa Fe Abstract, serving Santa Fe and Los Alamos counties. She has over 25 years of complex real-estate experience that includes, in addition to her escrow experience, working as a real-estate paralegal and working for real-estate developers.