Why I Need Title Insurance?
Title Insurance is probably a topic that you never heard about, up until the moment you decided to buy a house.
Suddenly here you are wondering, do I really need Title Insurance?
To answer your question, first let’s look at what Title Insurance is :
Title insurance is a kind of insurance that protects you as the homeowner for issues that happened in the past. For example, if there are tax liens against the property that you purchased and nobody knew about until now, or even if somebody else claims that they were supposed to be sold the home you are in and now they are going to sue you, in either event, you will need to hire an attorney to defend your ownership right and that is why Title Insurance is so important, because it will cover those costs.
However, Title Insurance goes even beyond that, because it essentially protects both you and your lender from the possibility that your seller doesn’t—or previous sellers didn’t—have free and clear ownership of the house and therefore, can’t rightfully transfer full ownership to you. If you don’t have title insurance and someone makes a claim on your property, you could in fact lose the property itself.
Homeowners are sometimes not required to buy Title Insurance, but it’s a risky proposition to not get it. The price for Title Insurance varies per purchase price of the property but is certainly a small price compared to any issues that could arise if you don’t have Title Insurance. Different from most insurances that require an annual premium, for Title Insurance you only pay a one-time premium and you are covered for the remainder number of years that you own the property.
Title Insurance can protect homeowners from various scenarios, such as:
- Title forgeries
- Tax Liens
- Filing errors
- Unknown heirs to the estate who claim ownership
- Inconsistent or conflicting wills
- Liens, commonly from unpaid home equity lines of credit (HELOCs) or contractor bills
- Undocumented easements
Therefore, is better to be safe than sorry when it comes to Title Insurance, because in any event you want to ensure you can protect your home ownership right.
Will My Lender Have a Title Insurance Policy?
Yes, the lender will require their own Title Insurance policy.
During a mortgage loan Title Insurance will typically consist of two policies:
A lender’s policy and a borrower’s policy. The lender requires that you purchase lender’s Title Insurance, to pay for its legal defense costs and reimburse any mortgage payments you can’t make because you’ve lost the house to someone else’s claim on it. The lender might also require you to buy an “owner’s policy” to cover your own legal fees and other losses, yet another step toward protecting the lender’s collateral. Even if your lender doesn’t require you to buy an owner’s policy, you should probably consider buying one anyway, given all the reasons cited above.
How The Preliminary Title Search Helps Ensure a Clear Title
Your Title insurance company will perform a “title search” as its first task before issuing the policy.
The search involves a detailed analysis through public records concerning the house—including past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments, and tax records.
The resulting preliminary title report (sometimes called a “title insurance commitment) gives everyone a chance to eliminate trouble spots before proceeding with the sale.
If any issues are found (title defects), the seller will be responsible for clearing them, since you’re being promised a clear title.
Your Title company will coordinate with the seller’s real estate agent or attorney if the report shows a defect. Most sellers agree to pay off any liens through a deduction from the purchase money at closing.
However, keep in mind that no preliminary title search, no matter how complete, can predict when a long-lost relative or heir will turn up or whether paperwork buried for years under a misspelled name will reveal a claim concerning the property. That is another of the many reasons why you need Title Insurance.
If you have a question regarding your specific transaction or would like us to coordinate your closing, contact us online at catherine@bridgetitlefl.com or call us at 561-221-6940