Sec. 114. Certificates of title may be limited or unlimited. A Limited Certificate commences at a certain date, such as the record of the decree in a suit for partition or the like, as may be indicated by the parties ordering the certificate, and embraces intermediate time up to the date of the certificate. It does not cover the entire title. An Unlimited Certificate of Title covers the entire title from the very first instrument of record affecting the premises described down to the date of the certificate. (See Form No. 47.) The majority of transfers are done on the faith of the Unlimited Certificate of Title. A Continuation Certificate of Title covers the time from the date of the last certificate to the date of the continuation.
Sec. 115. A Policy of Title Insurance guarantees the purchaser or holder against loss or damage which he may sustain by reason of defects in the title to the land he buys, not only such as may appear of record, but also many not disclosed of record, which the most searching examination of the records could not discover; among these are forgeries, secret marriages, insanity, heirship, alienage, etc. Policies are applicable to all the varying forms of real estate transactions. Appropriate forms are issued furnishing indemnity not only to owners, but to holders of deeds of trust and mortgages. (See Form No. 48.) The most important element of a Policy is that the party insured is enabled to avoid expense in defending the title, and is secured against loss if the title fails. Attacks on titles are frequently made under various specious claims. If the attack proves successful, the loss is increased by the amount of the expense of the suit, but even if the attack be warded off, the cost of defense may, and often does, entail serious inconvenience and sometimes embarrassment. If the title is insured, all such trouble and expense can be avoided, as the Title Company always stands ready to defend. Liability under the policy matures when a defect, liable to cause loss, is discovered and properly made known to the Company.
Sec. 116. Closing real estate transactions in escrow by title companies is of especial value to the public, as it relieves both the seller, who is parting with his property, the buyer, who is parting with his money, and also the real estate broker, if he be concerned, of all responsibility, and places the entire matter in the hands of specialists, who will consummate the deal in accordance with the written instructions of the parties, safeguarding every step. By making transfers in escrow, the risks before pointed out attending such transfers, are entirely avoided. The purchaser deposits his money with the company, and in connection therewith gives his instructions, as in Form No. 40, and signs same. These instructions will vary according to circumstances, but in general will direct the title company to obtain from the seller:
(1.) A deed to the premises, in favor of the purchaser, or of some person or corporation designated by him.
(2.) If there be a mortgage on the premises, either (a) the payment of same, in which case a release is to be obtained and recorded; or (b) the assuming of the mortgage by the purchaser, in which case the deed is to be made subject to the mortgage (See Form No. 13 for the correct wording of this) and the purchase price will be composed of the amount of the mortgage and a balance to be paid in cash, the seller paying the interest to the date of the transfer.
(3.) If a new mortgage is to be given, it will be given either (a) to the seller, and be evidenced by a promissory note secured by mortgage on the premises sold, or (b) be given to a third party and be evidenced by a promissory note and mortgage, and the money so borrowed will come in the shape of a check or draft from such third party.
(4.) If the premises are held by a lessee, under a written lease, a written assignment from the seller to the buyer is to be obtained and recorded, provided the original lease is of record.
(5.) If there be insurance on the premises, a transfer of the policy of insurance, together with the assent to such transfer by the insurance agents, such transfer of insurance to take effect practically simultaneous with the transfer of the property.
(6.) A rebate agreement, as per Form No. 42.
(7.) A stipulation as to who shall pay or assume the unpaid taxes, if any.
The seller also gives his instructions as per Form No. 39 and ratifies the purchaser's instructions, by signing at the bottom of Form No. 40. These forms are filled out by the clerks in the escrow department in accordance with the verbal instructions of the parties, and each party is given a card having on it the name of the clerk and the number of the escrow, and all inquiries concerning the escrow are to be made by number. The purchaser also receives a receipt for any money paid in by him in connection with the escrow.
Sec. 117. Attached to certificates and title policies are plats of the premises, giving dimensions, and showing width of streets and alleys.
Sec. 118. As suggested in Section 68, it is advisable before the escrow instructions are given, to have a written agreement, covering every phase of the transaction, and providing in particular that the deposit and part payment shall be forfeited to the seller in case the buyer shall fail to carry out his part of the agreement within the time limited, and for the seller to receive into his possession such deposit, and, if in the shape of a check, to have same converted into cash immediately. The escrow instructions, in such case, will take into account, only the remainder of the money. Instances have occurred where purchasers, after placing a deposit evidenced by a check in escrow and giving escrow instructions, have been afflicted with chilled extremities and either stopped payment on the check or withdrew their accounts at the banks, thus defeating the sale. The escrow instructions do not provide for this contingency.