Title insurance is need for every real estate buyer. Find out why you need it and whether you need it or not.
Title insurance is a policy sold by an insurance company that covers the owner of property. It provides compensation to a property owner if there is any dispute over title to the property or claims on the owner’s rights to the property.
A title insurance policy can cover any claim made against real or personal property in adverse possession and will ensure that you have a valid title to the property being insured.
What is title insurance?
Title insurance is an insurance policy that protects the buyer of a property against defects in the title to the property. It is a form of real estate insurance that protects against losses caused by problems with a property’s title. The policy covers such things as encumbrances, easements, liens and other claims and interests in the property that are not disclosed in public records.
Many homeowners do not realize they need title insurance when they purchase a home. However, it is essential for anyone who owns real estate because it can protect you from many problems that may come up in the future.
Title insurance is insurance that protects you against losses due to title defects or liens on the property. A title insurance policy will also protect you against losses due to judgments, should you have to defend yourself against a lawsuit over your home.
When do you need to purchase it?
If you’re buying a home, it’s important to get title insurance as soon as possible — even before the closing date — in order to ensure that there are no legal issues with the property’s previous ownership history. In some cases, this may mean paying more upfront; however, it can save you significant time and money down the road if something goes wrong with the transaction.
If the seller doesn’t disclose any problems with previous ownership history at closing and then later decides not to sell their house after all, they could sue both you and the seller for damages incurred during the sale process — including lost rent income while they were searching for another buyer and legal fees associated with retrieving their home from sale escrow.
If you’re buying a home with less than 20 percent down, lenders will require you to purchase their own version of title insurance. However, if you’re paying more than 80 percent of the value of your home in one lump sum or making payments over time, then you don’t need this type of coverage from your lender’s company.
Is title insurance required by law?
In some states, homeowners are required to carry a policy of title insurance for their homes in order to protect them from loss caused by errors in the public records related to their property. In these states, failure to obtain this type of coverage could result in fines and penalties being levied against the homeowner by local authorities.
In other states, homeowners are not required by law to obtain any type of title insurance at all. However, lenders may require their borrowers to purchase this type of coverage as part of a mortgage loan transaction.
What can go wrong with a real estate transaction?
The most common problems that occur in real estate transactions are:
1. Lack of title insurance. While title insurance is not required by law, it is highly recommended. It protects against losses that result from defects in the title to the property being purchased or sold. Title insurance also provides coverage for various other risks such as errors and omissions on surveys, errors in grading and drainage plans, liens and judgments against the property, and other substantial defects in the title to real property that may not be readily apparent to either buyer or seller.
2. Undisclosed existing problems with the property. Problems such as defects in construction workmanship or materials, environmental contamination issues (e.g., lead paint), and dry rot may not be disclosed during the sale process or may not be discovered until after an inspection has been performed or after a sale has closed. If there is a valid claim for damages due to these types of problems, then your homeowner’s policy does not cover those losses unless you purchase an endorsement or rider for such coverage at an additional cost (or if you are selling your home). This can be costly if there is damage done after closing and before you have closed
How does title insurance protect your investment?
Title insurance protects you from financial loss due to problems with your title to real property. It also protects against loss due to the actions and errors of others, such as survey errors and fraudulent documents.
There are many things that can go wrong when buying or selling real estate. Here are some examples:
Liens: A lien is a legal claim against your property by someone who has performed work or provided materials for the project but hasn’t been paid yet. For example, if you hired a contractor to build an addition on your house and he didn’t pay his subcontractors, they could place liens on your property until they’re paid in full. In this case, title insurance would protect the purchaser’s investment in the property by paying off these liens out of its own funds before transferring ownership to the new owner.
Fraudulent documents: Fraudulent deeds can be created through forgery or alteration, sometimes years after they were recorded at
Will the seller pay for title insurance?
In most cases, a seller will not pay for your title insurance. You’ll need to pay for it yourself.
If you’re buying a home from a private individual, your lender may require that you purchase owner’s title insurance. Title insurance is optional for buyers who are not taking out a loan to finance their purchases. This means that it’s likely that the seller won’t pay for it but won’t mind if you want to buy it as part of your transaction costs.
Buying title insurance can help save you from having costly legal issues in the future.
The biggest takeaway from this should be that title insurance is definitely worth looking into. Whether you’re a first homebuyer, a repeat one, or someone who has neither need nor interest in ever buying property at all, title insurance can still be useful for protecting yourself from litigation and other legal issues with regards to your home. As you look into buying your home, consider title insurance; it’s hard to put a price on peace of mind and free of legal hangups.
What most people don’t realize, though, is that this insurance can also provide a great deal of protection against legal actions that have already taken place. For instance, if someone else has already made claims on the title to the land you are now buying (hypothetically), you would be protected by title insurance from having to deal with those claims as well. You see, when you buy title insurance, you are really buying peace of mind for your future—and it’s definitely worth the cost.
