Underwriting is a term many hear often, but few understand. We know that it is associated with insurance, but what is it? What does an underwriter do? Rather than look at underwriting in insurance on a broad scale, let’s take a closer look at the role of an underwriter in title insurance.
What is Underwriting in Insurance?
In the most basic terms, underwriting is the authorization to write an insurance policy - and the person who gives this authorization is known as the underwriter.
When it comes to title insurance, an underwriter is often employed by a title company. They thoroughly review title documents to reduce any risk involved in the real estate transaction. While it should be something any buyer would want to undergo, lenders often require that a title search is done to make sure that the seller has the authority to sell the property and that there is nothing to cloud the title.
Underwriting gives lenders and buyers the confidence to move forward with the real estate transaction.
What is an Underwriter Looking For?
Throughout the title search, an underwriter is looking at the following:
Unknown liens or judgments
Forged or fraudulent (illegal) deeds
Missing wills and unknown heirs
Encumbrances
Boundary or legal description
Before the sale can proceed, the underwriter must be able to give title clearance. In other words, they must be able to say that there were no issues found with the title search. Or, that any issues they did find were cleared up as a condition of the closing.
Having a clear title is the goal for any buyer and lender. This is also the goal of the underwriter.
Once the title has been cleared, title protection is offered by the underwriter. This is a title insurance policy that will protect the buyer and lender from any future issues. Two primary types of title insurance are offered, including an owner’s title insurance policy and a lender’s title insurance policy.
Things to Know About Underwriting
An underwriter is all about reducing risk. They have their company’s best interest in mind so they look at everything closely. If they are going to offer you a title insurance policy, then you can trust that they did a thorough search of the title records. Lenders trust in this and will proceed with the loan if the underwriter is willing to provide the protection.
Underwriters typically need anywhere from a day to two weeks to complete their search. The specific time frame will depend on the extent of history surrounding the property and if any title issues arise that need to be addressed, such as cleaning liens or obtaining payoffs.
Are there benefits to going through underwriting? Absolutely. Once the underwriter clears the property to continue with the sale, you will have peace of mind. Your lender will, too.
Learn More About Underwriting
If you want to learn more about title insurance and the underwriting process behind your policy, you need an experienced, solid title team to fill you in. And, that’s exactly what you will find at Blue Pointe Title.
Contact us today at (517) 258-1511.
Comments