Title Insurance, Who Needs It?

Investing in title insurance can save buyers and lenders from possible future headaches related to unforeseen contract disputes. Here is how it works and what it can cover.

How it Works

Title insurance works in reverse—it covers problems that occurred before you purchased a home rather than after an acquisition, including late discoveries. A buyer must obtain title insurance before the property transaction, and there is only a one-time payment. Refinancing may require a new policy—otherwise, it is for the life of the homeowner's loan.

When a title search is completed, any issues discovered are presented to the seller, who is then given an opportunity to resolve them. If the seller declines to settle any concerns, it is up to the buyer to accept the deal as is or walk away. Consulting with a real estate agent at this time can help clear up any confusion.

What Title Insurance Covers

Title insurance coveries forgeries, such as a deed that is not true or accurate or contains fabricated signatures. Non-legally binding signatures include those of minors, illegal immigrants, or mentally disabled individuals. Unknown heirs, unpaid taxes, or child support liens are fairly common and must also be resolved with the help of a real estate agent. A simple error can cause property rights to be challenged, resulting in an expensive endeavor, even when resolved in your favor.

There are Two Types of Policies—Owners and Lenders.

When buying a home, standard owners’ policies protect buyers against encumbrances on the title, such as legal liabilities, easements, or fraud. This guarantees the title is marketable and legally worthy for resale. Standard owner policies cover the amount of the original purchase price and do not include increases in property value. An inflation rider is available to bridge that gap to prevent loss or damages of future higher assessments. Lenders insurance, also known as the mortgagee policy, protects the lender against such things as hidden liens or second mortgages. It covers only the at the time of purchase. When in the process of buying a home, consult your real estate agent about whether or not you may need title insurance.

Lenders insurance, also known as the mortgagee policy, protects the lender against such things as hidden liens or second mortgages. It covers only the market value of the home at the time of purchase. When in the process of buying a home, consult your real estate agent about whether or not you may need title insurance.

Article By
Comments (0)

Search All Listings
Contact
Social Media