Everything You Need to Know About Title Endorsement – And Whether You Need It
If you’re in the market for a home, you are probably familiar with title insurance, as mortgage lenders almost always require it to close your mortgage. But not everyone knows what title endorsement is or why it’s wanted or needed. We’ve got you covered.
What Is A Title Endorsement?
“Title endorsements expand the coverage of a standard homeowner’s title insurance policy, usually either by removing exceptions to the standard policy or by adding coverage specific to the property’s situation,” explains Elizabeth Whitman, attorney-at-law with Whitman Legal Solutions in Potomac, Maryland.
While a standard title insurance policy will protect against many common title issues, such as recorded liens not listed on the policy, errors in the deed or fraudulent deeds, title endorsements cover more specialized issues, she says.
There are two types of endorsements. “First, the lender’s underwriters have certain requirements to underwrite a loan, which are determined by the lender,” says Eric Klein, principal attorney and president at Klein Law Group in Boca Raton, Florida. And second, in addition to the underwriter’s required endorsements, the borrower might request certain endorsements be added to a policy.
While the American Land Title Association (ALTA) regulates and sets guidelines for the different types of endorsements on a national level, each state also has its own Land Title Association, which might have additional requirements.
What Types Of Title Policy Endorsements Are Most Common?
Title endorsements can cover a wide variety of issues, many of which will be specific to your state or region. However, some of the more common endorsements for owners of residential properties include:
Indirect Access And Entry
This ensures the owner will have access to the property from a public street, explains Whitman. “The indirect access and entry endorsement is important when the property is not adjacent to a public street or depends on an easement over someone else’s property for access to the road.”
These have to do with how certain structures are situated on your property. For example, if your garage was built too close to the property line, and the eaves overhang into the neighbor’s yard, the title company will endorse encroachment and provide coverage for losses in case a future neighbor demands you move the structure, says John O’Brien, senior business attorney at O’Brien, Watters & Davis in California.
Covenants, Conditions And Restrictions
This endorsement generally provides coverage for owner losses from violations of restrictive covenants, Whitman says. For example, perhaps local zoning regulations allow you to build a second accessory unit on your property. However, when the property was subdivided, the subdivision plat included a restriction that states only one structure can be built on the lot. In that case, the owner wouldn’t be able to build that second unit unless a CCR endorsement is obtained.
Do I Need A Title Endorsement?
The cost of title endorsements varies from state to state but will be the same from any lender; in other words, you don’t need to shop around for these. Although many endorsements aren’t necessarily very expensive, policy holders still need to consider whether the cost of the endorsement justifies the benefit, says Whitman.
For example, while an endorsement that covers mechanic’s liens might be important for a property that recently has undergone substantial renovations, it can be less important for a property where no work has been done in the past several years.
In Illinois, for instance, an endorsement for a mechanic’s lien would be important in context of new construction because there are up to 120 days after work is completed to file a lien, explains O’Brien.
“If work was recently completed, you would want an endorsement that says the title company is satisfied that the builder has paid all the workers,” O’Brien says. “So if one of them later files a lien, the company will defend against that lien.”
You should be aware that for many of the endorsements, an extensive property survey might be required, which will add to your costs. Also, because title endorsements only require a title insurance company to compensate an owner for actual losses, an owner who puts down a large down payment has more to lose if there is a problem than one whose down payment is modest, Whitman says. It’s very unlikely this will happen, but being aware of this helps you make the best decision.
How To Get A Title Endorsement
A home buyer who wants to know what is needed should start by taking cues from the lender, explains Whitman. “That’s because the lender usually provides 80% or more of the money for the home purchase and has an incentive to select appropriate endorsements,” she says. “If the lender wants an endorsement, then the owner should ask for the comparable owner’s endorsement if it is available.”
Title companies usually charge very little for an owner’s policy if the same endorsement is on the loan policy.
However, while real estate agents and lenders can answer many questions, often they do not have a great depth of knowledge relating to title insurance, says Klein.
“While they know enough to answer very cursory questions, anything more expensive or specialized might not be in their wheelhouse. A title company may provide answers to common questions, but for more confirmation or questions, a home buyershould consult with an attorney.”
Title Endorsement FAQs
What Is An EPA Endorsement On Title Insurance?
ALTA’s Environmental Protection Lien (Endorsement 8.1 and 8.1-06) protects the insured from any damage that might occur on their residential property due to environmental liens that aren’t declared as exceptions to the title policy. While individuals seeking to learn more about title endorsements often refer to this as an “EPA endorsement,” this language can be misleading, as the liens that the insured is being protected from aren’t always ones filed by the Environmental Protection Agency.
What Is A Survey Endorsement?
More commonly referred to as “Survey Deletion Coverage,” this type of endorsement protects the insured from errors made by their residential property’s surveyor by deleting specific language in their title policy that might limit coverage and replacing it with the phrase “shortages in area.”
Title endorsements can be extremely useful for homeowners who are concerned that their title insurance policy won’t provide sufficient coverage if certain issues already exist or arise in the future with their property. If you’re wondering whether you would benefit from incorporating more specialized protections into your policy, get in touch with your title company or a real estate attorney to learn more about what your best options would be.