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What you need to know about title and title insurance

The title to a property is an important factor in any commercial real estate purchase in Florida. Before the transaction is finalized, the business owner will need to know that the title is free and clear. Even when this information has been provided, the buyer will probably be required to purchase title insurance.

According to SFGate.com, unlike a deed, the commercial property title is not a document that is signed and handed from the seller to the buyer, but a report of the history of ownership of a property. This is typically compiled by a professional who researches the records of the deeds, liens and other documentation regarding the property.

Examples of problems with title that may arise include clerical errors and outstanding liens against the property. The American Bar Association points out that any problems in the title report may affect the lender’s ability to enforce the mortgage, so most real estate transactions also require title insurance, which protects against title lawsuits and other issues. Just as with a health or vehicle insurance policy, the purpose of the title insurance is to mitigate risk of loss.

The policy maybe modified to include specific elements of risk that the lender wants covered. These are known as endorsements, and they may include insolvency, environmental problems, zoning and others. The cost of the title insurance may be affected by the endorsements that the lender requires. Exclusions may also be listed in the title insurance, listing specific or general issues that are not covered by the policy. 

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