Title insurance is important when you are buying real estate. Think of it as an insurance contract between you and your title insurance company that protects you and your lender during your property ownership.
"Title" traces the property's chain of past owners, debts, taxes, and how you can use the property. Knowing this information and having this type of insurance is critical to property ownership.
When you and the seller send your real estate transaction to escrow with instructions to provide title insurance, title experts will conduct a thorough search by looking through public records to track who owned the property, find any existing liens, and spot any easements. The first report issued from this search is called the preliminary report. It allows you to look at any problems that might affect the property's title before moving forward with the deal. The title company clears all the agreed-upon items from this report before closing. These items often include the seller's unpaid mortgage, overdue property taxes, other liens that need payment before the transaction will close, and anything that showed on the preliminary report that the parties agree to clear. After clearing items, any items left on the report are transferred with the property to you, the buyer, and become your responsibility.
There are two types of title insurance for buyers to consider*:
Lender's title insurance protects the bank that's giving you a mortgage.
Owner's title insurance protects the homeowner.
*These policies aren't the only option when dealing with title insurance. Other policies or add-ons that address specific and unique requirements are available for purchase. These special policies give extra protection or cover unusual situations that a regular policy might not cover. Some examples are commercial properties, new construction projects, leasehold interests, or even specific environmental risks. Talk to a title insurance company to find out about available choices.
Benefits
Title insurance gives homeowners peace of mind. Purchasing a home is a major financial decision, and unexpected claims can be stressful. With title insurance, you can feel confident knowing your ownership is safeguarded.
Although a title search is thorough, it might not discover every issue. For instance, there could be a forgery in an earlier deed, a missing heir, or an improperly documented easement. Title insurance serves as a safety net by offering financial protection, covering the expenses of addressing many unexpected issues that may not have surfaced during the title search, and ensuring a clear title.
Defending ownership rights against a challenger can be intimidating and costly. Title insurance offers the benefit of covering legal fees if someone wrongfully contests ownership.
Cost
Title insurance is paid at closing.
Conclusion
As a buyer, it's important to understand the value of title insurance. If you have any questions about it, your real estate agent can direct you to the title insurance company for your transaction.
Title insurance can help you feel more secure about your new home.
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(C) 2024 Jeff Sorg
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