Iowa has the cleanest title in the country. While Iowa doesn’t have title insurance like the rest of the country, we use a state-specific solution, that works to the benefit of Iowa residents. In Iowa, the title is cleared prior to the closing of every residential transaction, eliminating the need to insure against title defects. How is that possible?
The Basics: Title and Title Insurance
A title is a legal document that shows who has the right to possess and use a particular piece of property. Title insurance provides some protection to buyers if there is a problem with the title to their property. If there is a problem and someone contests your title, the title insurance company will step in to defend you in court. They will also compensate you if you lose your case as well. This type of insurance is available for both the owner of the property and the lender.
While title insurance may seem like a good deal, it is not permitted in Iowa. In fact, Iowa is the only state that does not allow this type of insurance. Instead, an Abstractor will update your abstract and an attorney will issue a title opinion to help you determine if there are any problems with your title that need to be addressed before closing.
This law unique to Iowa likely raises a variety of questions for new or potential buyers, particularly those who are buying in Iowa for the first time.
What is an Abstract?
An abstract provides the extensive history of the title of a piece of real estate. It is a paper document, which is unusual compared to other states. It is not the title, but it provides a summary of the important recorded documents related to the title. Although the abstract is a significant document, you will still own your real estate, even if you lose your abstract. However, they are expensive to replace, so it is a good idea to keep your abstract in a safe place.
What is a Title Opinion?
An experienced Iowa attorney will provide a title opinion when you purchase real estate. This opinion is developed through an examination of the abstract. The title opinion will determine whether you have a “clear title” or if there are any potential issues. The title opinion will also outline any possible restrictions relating to the property of which new owners should be aware.
Do I Have to Have a Title Opinion?
A buyer should engage a local attorney to prepare a title opinion on their behalf and the seller should engage a local attorney to clear any issues identified in the title opinion. Most purchase agreements require the seller to transfer title via a warranty deed. This means the seller is delivering clean title to the purchaser. The only way to know this is, in fact, true is if there is a title opinion prepared and issues are addressed prior to closing. If you are financing your real estate purchase, the lender will always get a title opinion. Most buyers will rely on their bank’s attorney to ensure that they have a clear title, but that may not always be a good idea. Having a second opinion that has your interests in mind might be a solid investment. In fact, if there is a defect that the lender’s attorney overlooked, you may not have any recourse against the bank’s attorney.
What Are Some Potential Title Problems?
Title issues can vary widely. Some examples of problems may include:
- Undisclosed or missing heirs
- Incorrect legal descriptions
- Unsatisfied claims that are not shown on the record
- Wills that affected the property but were not properly probated
- Conveyance by a minor
- Incorrect indexing
- Confusion because of similar or identical names
- Clerical errors
- Unreleased prior mortgages
- Child Support/ Alimony liens
- Unpaid homeowner’s association dues and assessments
- Special assessments for local development projects
An experienced attorney can address all of these issues. Danilson Law has extensive experience review and drafting title opinions in Iowa, and he can help you in your real estate transaction. Call today for more information.
