What are Title Insurance Policy Exceptions in Real Estate?
I love talking about title insurance exceptions because they're such a critical part of real estate transactions that often gets overlooked. If you're buying property, you'll want to pay close attention to these details that could affect your ownership rights.
Title Insurance Policy Exceptions: Specific items or issues that are not covered by a title insurance policy, even though they may affect the property's title. These exceptions are clearly listed in the preliminary title report and can include things like existing liens, easements, or restrictions on the property.
Common Types of Title Insurance Exceptions
Let's break down the two main categories of exceptions you might encounter. First, we have standard or general exceptions - these show up on pretty much every title policy. Think of them as the usual suspects:
Current year's property taxes that haven't been paid yet
Those utility easements running along your property lines
Local building codes and zoning regulations
Any existing tenants' rights if the property is currently rented
Then there are special or specific exceptions unique to your property:
Outstanding mortgages or liens
Restrictions on what you can do with the property
Homeowners association rules and requirements
Any ongoing boundary disputes with neighbors
Impact on Real Estate Transactions
These exceptions can really shake up a real estate deal. Some might knock down your property value - like finding out there's a utility easement right where you planned to build a pool. Others might just be minor inconveniences.
I've seen buyers and sellers go back and forth on exceptions. Sometimes they're deal-breakers, other times they're just negotiating points. The key is knowing which battles to fight. You might ask the seller to clear up certain exceptions before closing, or adjust the price to account for them.
Understanding the Title Report
Your title report isn't light reading, but it's where all these exceptions live. You'll find them listed in Schedule B of your preliminary title report. Each exception gets its own number and description.
Working with title companies can make this easier. They can explain what each exception means for you and might help remove some of them. Some exceptions can be cleared up with a phone call, while others might need legal work.
Common Misconceptions
Let me clear up some confusion about title exceptions:
Not all exceptions are bad news - some are just facts of life, like paying property taxes
Many exceptions can actually be removed with the right documentation
Title insurance has limits - it won't protect you from known issues listed as exceptions
Some exceptions barely impact property value, while others can be significant
Protecting Yourself
Do your homework before closing. Read every exception carefully. If something doesn't make sense, ask questions. Getting a real estate attorney to review the exceptions can save you headaches later.
Title insurance endorsements can help too - they're like extra coverage for specific issues. And don't be shy about negotiating. If an exception bothers you, bring it up early in the process.
Related Real Estate Concepts
Title exceptions connect to other important real estate concepts:
Title searches reveal the property's history
Chain of title shows all previous owners
Property surveys can identify boundary issues
Encumbrances might show up as exceptions
Conclusion
Title exceptions might seem overwhelming at first, but they're manageable with the right help. Don't go it alone - Bellhaven Real Estate has experienced agents who know how to handle title issues. We work with trusted title companies and can guide you through the process step by step. Stop by our office to discuss your real estate needs and get expert guidance on title matters.