Buying a home is one of the biggest purchases you will ever make. It encompasses many details, from securing financing to negotiating the price at every step. In such transactions, some details go unnoticed. One critical aspect that should be included is title insurance. While it may not be as exciting or necessary as securing that mortgage or conducting that home inspection, title insurance is an essential piece of the home closing process that can protect your investment in ways you may not realize.
Title insurance is one type of protection insurance covering real estate buyers and lenders from financial loss because of title defects in the title of a property. The title describes ownership of property legally, so the title needs to be clean of any lien, disputes, or claims over that property. In a real estate transaction, a title company examines all public records and surveys to determine the legal ownership of a property. But despite these checks, some issues might crop up later, affecting your ability to own and enjoy your property fully. That is where title insurance comes in.
If issues occur after your purchase, title insurance will ensure coverage if problems occur about that property title. Usually, it is purchased at closing and provides insurance coverage on a host of probable issues. There are generally two types of title insurance: lender’s title and owner’s title insurance. Let us start with the lender’s title insurance.
It is a standard requirement by the lender to buy a lender’s title insurance when financing a purchase of your property using a mortgage. That means this policy will guarantee your lender’s investment when some defects in the title emerge after closing, and they may be a previously filed claim from an owner or some undisclosed lien. But again, this policy won’t protect you as a buyer, and it only shows that your lender’s financial interest is secure.
Owner’s title insurance is also optional to protect the home buyer. It ensures the buyer’s financial interest in the property, including the equity in the home, should any title issues arise. This is important even if you pay for the property in full without a loan since title insurance will ensure your ownership rights are secure and you will not face financial loss from unresolved title defects.
Although the title search process is comprehensive, some unknown risks may pop up later. Such hidden risks include:
Previous owners, such as unpaid property taxes, contractor liens, or mortgages, may have left outstanding debts. They may be claimed against the property and could be your problem if they have yet to arise before the transaction. Title insurance can help you avoid paying these liens if they arise after the transaction.
Sometimes, an attempt may be made by unscrupulous individuals to pretend they own a property. This might use forged documents to change titles. This could result in a costly legal battle in determining your rightful ownership. It protects against the financial loss of such fraudulent claims. It also caters to the related lawyers’ fees and expenses.
While the title companies perform a rather detailed search of public records, clerical or filing mistakes can occur. A paper may be recorded incorrectly, or a previous owner’s data may need to be updated in the system. If such errors become a challenge to your title, the title insurance will pay for the necessary costs to clear the error.
In other cases, a former owner may die without leaving a legal title of the property to the heirs. If the heir appears after the sale and claims the property, then title insurance will ensure that the homebuyer does not lose money or go through litigation.
Sometimes, neighboring property owners dispute these property lines, which may lead to a conflict with the land you bought. It can resolve such disputes since it covers legal fees and the cost of defending your ownership rights.
Although title insurance is not usually very costly compared to other parts of the real estate transaction, it can provide great peace of mind. Title insurance is usually a one-time premium paid at closing, lasting as long as you or your heirs own the property. The protection it offers can save you from the financial ruin that might otherwise occur if a significant title issue arises.
Moreover, title insurance would prevent expensive and time-consuming litigation. Even if you encounter an issue that compromises your property ownership, you will not need to bear the full weight of resolving the dispute when you have insurance.
The closing process in real estate involves many steps, and while it’s easy to get caught up in the excitement of buying a home, securing title insurance should be a priority. It is an affordable safeguard that protects your rights as a property owner and ensures that your investment is secure. Whether you choose lender’s insurance or owner’s policy, title insurance covers you against the hidden dangers of a real estate deal. It protects your dream house from becoming a nightmare; it protects your investment, ensuring that the title of your dream home does not belong to anyone else.