By Lonnie White
WHAT IS TITLE INSURANCE?
Title insurance grants lenders and homebuyers protection against any sort of financial loss attributed to a defective property title. A property's title can have a wide variety of defects preventing the sale of the real property. Included below are a list of common title defects.
EXAMPLES OF TITLE DEFECTS
Back taxes
Liens
Filing errors
Inaccurate recordings
Unsatisfied judgements
Undiscovered encumbrances
Survey disputes
Forgeries
Conflicting wills
Every real estate transaction requires clear title to ensure that the subject property is free of any and all defects. Title insurance is a one time expense and it protects you from any costly fees that may arise from claims to the property. A single title insurance policy grants protection from every potential claim associated with the property. Title insurance begins with first conducting a title search. Title companies are required to perform a title search on every property's title to check for defects of any kind prior to issuing title insurance.
WHAT IS A TITLE SEARCH?
A title search is a thorough examination of a property's public record profile. The purpose of this search is to both determine and confirm who maintains the legal claim and ownership of a property.
TWO TYPES OF TITLE INSURANCE
LENDER'S TITLE INSURANCE
Lenders will require a borrower to purchase a lender's title insurance policy to protect the lender in the event of a clouded title (Title with issues/defects). A lender will always demand this protection to ensure that the seller is able to legally transfer ownership rights of a property. Lender's title insurance only provides protection to the lender.
OWNER'S TITLE INSURANCE
Owner's title insurance is purchased by the seller to afford the buyer protection against defects in the title. Owner's title insurance is an optional insurance that grants additional protection in the event that the conducted title search was ineffective.
BUYING TITLE INSURANCE
The top two questions which most people ask are:
Who sells title insurance?
How much does title insurance cost?
Does the buyer and seller both need to purchase title insurance?
Answer 1: There are 4 leading title insurance underwriters who dominate the United States' market. These include Old Republic National Title Insurance Company, First American Title Insurance Company, Stewart Title Guaranty Company, and Fidelity National Financial. In addition to these top four companies, there are numerous smaller companies that also issue title insurance policies.
Answer 2: The cost of title insurance ranges anywhere from $500 to $4000. This cost varies depending upon the price and location of your home, and the insurance provider writing the policy.
Answer 3: In many cases, both policies are required to ensure that all parties protected. This is a standard procedure during the closing process of a real estate transaction.
WHAT HAPPENS IF I DON'T HAVE TITLE INSURANCE?
Not having title insurance is an enormous risk. If you purchase a property without getting a title insurance policy, you are assuming all of the potential liability associated with the property from its previous owners. This means that any unpaid property taxes or liens which went unnoticed during the property search are now transferred to you, the owner. As a result, you are now responsible for paying to resolve these issues or you will potentially lose your newly acquired property from failure to do so.
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