Abstract of Title or Title Insurance: Choosing the Best Option for You

North Dakota is only one of a handful of states in the country where abstracts dominate the real estate landscape.  Whether you are buying your first home or purchasing a storefront for a new business, North Dakotans and those that choose to do business in the state have to decide if an abstract of title or title insurance policy is acceptable to their needs.  A sense of frustration may set in when trying to determine which product will best meet your need of showing ownership to your new land.

So, what will you receive if an abstract is chosen over a title insurance policy?  An abstract summarizes the history of all matters of public record recorded by an elected county recorder affecting a certain parcel of land.  The abstractor, who is the licensed professional drafting the abstract of title, searches the public record to a specific date looking for items such as deeds, mortgages, liens and affidavits that affect the condition of the land.  Attorneys are then hired to review the abstract and prepare a report called an attorney opinion that highlight matters that affect the land and, in their opinion, who owns the land.  Being the attorney opinion is just that—an opinion—it is possible for different attorneys to have different conclusions as to ownership of the land and the matters that affect it.

While an abstract does provide a full history of public matters affecting your land, what it will not do is provide a guarantee or insure your right to ownership.  Unforeseen issues affecting your right of ownership can always arise that is not visible in an abstract, such as fraud or undisclosed heirs, which might cause your right of ownership to be challenged months or, even years after the purchase in a court of law.  This is just one example where the purchase of a title insurance policy shows its value.  A title insurance policy is an indemnity contract issued by a title company to a person or entity it believes should have the right to own a specific parcel of land.  It is also common in North Dakota for mortgage companies to require the purchase of a lender’s title insurance policy insuring the priority of the lender’s mortgage lien on property being used as collateral.

Ultimately, the choice to obtain an abstract or a title insurance policy can vary from deal to deal, with some buyers deciding purely on cost or level of risk involved.  Regardless of the factors that go into your decision to buy title insurance or not, a buyer should keep in mind that a title insurance policy, subject to its terms and conditions, can help cover the costs for unexpected matters such as a legal defense against claims challenging your ownership, correcting existing title defects affecting the marketability of your property, or in some situations, coverage for a complete loss of the property.  Although ownership challenges and title defects do not impact every land owner, thanks in part to the work title companies do each and every day, hidden risks do exist and often occur when least expected--will you be ready?  

Joseph A. Camisa, Jr.