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What is a title abstract?

QUESTION:

How is an abstract different from title insurance? Which is better?

ANSWER:

Most real estate purchase and sale agreements require the seller to provide an abstract or other evidence of title. There are some areas in Florida that by custom primarily provide abstracts to buyers. However, most areas require the seller to provide a title insurance commitment with a policy to follow after closing.

The contract usually gives a choice as to which type of evidence of title is to be provided. To decide, it is helpful to determine whether the seller already has an abstract of title. If an abstract is already done, it will usually be less expensive to recertify and update the existing abstract.

However, if there is no existing abstract available, then a title insurance commitment and final policy is probably more economical. A buyer will usually prefer to have a title insurance commitment and final policy. A title policy will give the buyer protection against many types of claims that could conceivably be filed against the property. That protection stays in effect as long as the buyer continues to own the property.

If the buyer receives an abstract, the buyer’s attorney will need to review the abstract and give an opinion as to ownership and matters affecting title. If an error is later discovered, the buyer’s recourse may be against the attorney for negligence or against the seller for breach of warranties given by the deed.

With a title insurance policy, the buyer is able to file a claim with the insurance company. If the claim is insured under the policy, the buyer will have considerably less out-of-pocket expense for defense costs and possible damages.

Usually the contract requires that the seller furnish this evidence of title within a specified time period. If the seller does not do so, a reluctant buyer might seize this as an opportunity to cancel the deal.

Once the buyer receives the seller’s evidence of title, the buyer should make objection to any defects within the period of time allowed by the contract. Otherwise, the buyer may be held to have waived and accepted the defects. Receiving evidence of title, whether it is an abstract or a title insurance commitment, is an important part of a real estate purchase. For most buyers, a title insurance commitment, with a policy after closing, is preferred.

This information is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.

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