September 2020 - Issue 35

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Hurricanes lashing the gulf coast - wildfires rampant across the west.

When it comes to protecting your home, everyone immediately thinks of property and casualty insurance - the kind that covers you in the event of physical damage. But when you purchase your home, you get another kind of insurance policy: title insurance.

Now, I know that title insurance isn't the sexiest subject you can talk about when it comes to real estate. But it's an important feature of the transaction. If you really

you want to make sure that your investment is as safe as it can be.

This month, we start visiting with Ken McAlister, Vice President, Treasurer, and Attorney for Texas Secure Title Company about what title insurance is, why it's important, and things to think about when selecting a company to cover your home.

xo-

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Ken McAlister is a Fort Worth native who came home after attending Texas Tech University School of Law.

He started his legal career trying civil lawsuits and representing people in family law matters.

After many years of handling cases that often involved real estate disputes, Ken opened a title company fee office in 2010. Later, in 2014, he and his colleagues opened Texas Secure Title. Ken currently serves as Vice President, Treasurer, and Attorney at Texas Secure.

Texas Secure has offices in Fort Worth, Colleyville, Burleson, Bedford, and Farmers Branch, but they understand the special demands of the times and can close your transaction virtually anywhere.

HHA – Hi, Ken. Thanks for being with us today.

KLM – My pleasure.

HHA – We'll put a bit about your background in the introductory materials, so let's dig right in, okay?

KLM – Sure thing.

HHA – We're here to talk about title insurance, but I think more broadly, people might be interested in title insurance companies. Every contract to buy a home has a section in it to select a title company. Why is that? What role do they play?

KLM – In a nutshell, title companies wear two hats. First, they write policies of title insurance, which guarantee that the buyer is getting good title to the property. Second, the title company acts as an escrow agent, holding money – usually the earnest money – in trust and disbursing it as appropriate.

HHA – Let's talk first about the title insurance aspect. If someone says, "I'm selling you X piece of property, don't you simply have to make sure that they have the deed to that piece of property?

KLM – Well, yes. But it's not quite that simple. There are all kinds of different interests that someone might own in a given piece of real estate, and various kinds of liens that might exist. For instance, one that a lot of people might be familiar with is a contractor's lien. Let's say that the seller had a bathroom or kitchen renovated and didn't pay the contractor for all of the work. By following certain procedures and filing the right paperwork at the county clerk's office, the contractor can put a lien on the property that will have to be taken care of before clear title can pass – and before a title policy can be issued.

HHA – Well, that could be a problem.

KLM – It can, and it happens all the time. When something like that shows up in the records, it can stop a deal cold. But it's something that has to be corrected before a buyer spends what might be their life savings on a home.

HHA – Okay, I guess it would be a good idea to walk through the process. When I want to buy a house, and my realtor writes up an offer. What happens next?

KLM – Assuming that both parties agree to Texas Secure as the title company, the first step is to deliver the contract for purchase to our offices, along with the check for the earnest money. We can't start the process – and we can't issue a title policy - unless there is a contract signed by both the buyer and the seller.

HHA – Let me interrupt you and back up for a minute. Who chooses the title company, the buyer or the seller?

KLM – Even though the title policy protects the buyer, the seller usually pays for it, so the seller usually picks. However, the choice of title company is one feature of the contract that you can negotiate. The buyer can offer to pay the policy premium and, if they do, the seller usually will agree to let the buyer choose the company. Or the seller may not have a preference, and so will agree to whichever company the buyer puts in the contract.

HHA – Since the seller usually pays the premium, wouldn't they want to use the company that charges the lowest premium?

KLM – In Texas, title policy premiums are fixed by the Texas Department of Insurance, not by the issuing company. So prices for title policies are the same, no matter which company you use.

HHA – So, what's the difference? Why would someone prefer one company over another?

KLM – Customer service. And, honestly, it usually comes down to the real estate agents involved. They're the ones who have lots of experience with different companies. If a company is easy to work with, keeps the parties informed of the progress of the transaction, and doesn't make the agent do work that the title company should be doing, the agent is going to prefer that company over one that is less, let's say, accommodating. Sometimes, however, the parties to the transaction might have a preference because of personal or business relationships. If there is a conflict, though, the general rule is, "Whoever pays the premium chooses the company."

HHA – Okay, back to the point where everyone agrees that Texas Secure is the place to be. You get the signed contract and the earnest money check. What happens next?

KLM – We open a file, deposit the earnest money into a trust account – which means that it sits safely, waiting to be applied to the purchase price at closing – and start a title search.

HHA – What’s a title search?

KLM – The best way to explain that is by looking at a little history.

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