Title Insurance Facts

Although buying a home can be a thrilling moment in your life, you need to understand that you may not be the first owner. The seller should have a clear title to the property. This means that there are no other claims against the property. In the event of title defects, it is a good idea to purchase title insurance.

Title Insurance: What is it?
Title insurance covers you against financial loss arising from the property. Your title company will search public records for information about the property’s ownership history when you are buying a house. Clear title means that the current owner is the sole owner of the property and has no legal claims, such as taxes or liens.
You should still have title insurance even if your title is clear. Sometimes title defects can be discovered later than expected. This could cost you a lot of money in legal fees and, in the worst case, even your property and all the money you invested.

Title Insurance
There are two types of title insurance.
• Lender’s Title Insurance – Lender’s insurance protects the lender in the event of a title issue.
• Title Insurance – The insurance that protects your equity and is usually paid by the seller.
Facts About Title Insurance
1. Title insurance differs from homeowner’s coverage. Homeowner’s Insurance protects you against future losses. Title insurance covers defects in the title such as liens or encumbrances. Unpaid taxes, money owed to contractors, and mistakes in the title search could all lead to defects in the title. Sometimes there are unidentified facts, such as an heir who claims rights to the property.
2. Title insurance costs are one-time. You pay only for closing title insurance. Then you are covered as long you or your heirs remain the property owner. While the cost of title insurance can vary from a few hundred dollars to a few thousand dollars, the average policy cost is $1,000. The price depends on where you live and how much your home is worth.
3. No owner’s insurance required. The seller usually pays for the policy of the lender. But the terms of any negotiable policies are open to negotiation.
4. Title is not the same as escrow. – While some title companies manage the escrow for a home, the title itself and the escrow do not match. Escrow companies act as neutral third parties that hold funds, record the deed, and manage the real estate transaction.
5. You might need more than a standard policy. A standard policy does not cover all title defects. An endorsement can be purchased to protect you from future defects, such as property access, zoning, and right-of way issues.
6. You have the option to choose your own title company. – You don’t have to use the seller’s title company. Sometimes, a listing will identify a specific title company. Verify that the company is trustworthy. Your policy will not be valid if the title company goes under. If the seller pays for the insurance, they usually get to choose the title company. However, you can always negotiate to have the title company that suits your needs.
Are you still unsure about title insurance? We are here to help. Reach out to us with your questions.