Why do I need Title Insurance? When you are going down the list of things that must be paid for at closing, you may hear your Real Estate Agent or loan officer talk about title insurance. Most people have heard of this expense, but have no idea what it’s for. Title insurance can be the difference between you losing everything you put into purchasing your home or coming out unscathed if something is amiss. Let’s take a closer look at Title Insurance.
What is Title Insurance?
Title insurance is protection against an error in preparing the deed, fraud, undisclosed heirs, or a lien against the property that the new buyer is not aware of. It also ensures that the person selling the home is actually the owner and has the right to sell. A title company is responsible for researching the title of the property to ensure there are no issues. Most of the time when problems are found through title searches, they are cleared up prior to closing. Title Insurance is a one-time fee paid at closing and it’s based on the loan amount or purchase price of the property.
Owner’s Title Insurance
As the owner of the property, if a problem arises with the title; the insurance can help in a few ways:
1. They will pay for the owner to be defended in court if someone challenges the title of the property.
2. They will pay you money to cover your equity and other expenses if you lose the case.
3. The title insurance can just pay for the issues that come up after closing.
Lender’s Title Insurance
The lender’s policy, also known as a “loan policy” covers any issues with the property prior to the owner’s policy being put into place. With this coverage, the personal interest of the owner is not included. The lender uses this policy to safeguard itself from any issues with the property title. One of the most interesting aspects of this type of insurance is that it is normally paid for by the borrower.
Better Safe than Sorry
When we buy a home we never like to think of the things that can go wrong. Finding out after you purchase your home that you don’t really own the property can be devastating. By purchasing an Owner’s title insurance policy, you are ensuring that you and your family are protected against any defect in the title that may rear its ugly head in the future. Remember, although you may be responsible for purchasing the Lender’s title insurance; it doesn’t protect your stake in the home. I’ve seen instances after closing, the city contacted the new homeowner and said there were unpaid taxes from the previous owner. The Owner’s title insurance covered that. I’ve also seen an instance where my client bought a foreclosure in a neighborhood with an HOA. About 6 months after closing, the HOA came forward and said there were past HOA dues owed. The Owner’s Title Insurance protected our client.
Although, you know the title search has been completed; nothing is 100% guaranteed. This is when the title insurance becomes a valuable asset.
For more information about Title Insurance or real estate in Bradenton, Anna Maria Island or Longboat Key, Florida contact local real estate agents, Jen and Mark Bowman, Keller Williams on the Water at 941-840-0117.