Buying a piece of property is very exciting - especially if you are buying a home for the first time. Unfortunately, it can also be very expensive. On top of your down payment, you may encounter appraisal fees, application fees, real estate commissions, attorney fees, title search fees, and more. So, when purchasing title insurance is mentioned, you may be asking yourself, but do I really need it?
What is Title Insurance?
As you go through the process of buying your property, a title search is going to be completed. This is a thorough look at all the records and chain of title concerning the property - all the way back to when it was initially built. Every detail is reviewed, making sure that the title is free and clear of anything that could infringe upon your rights to it.
Title agents keep their eyes peeled for things like judgments, liens, tax liens, easements, encroachments, deed errors or issues, and so forth. Should any of these arise, a title curator will work with the parties involved in the transaction to clear them up before the closing - or shut down the deal entirely. For instance, a small judgment can be paid and removed from the title or may have already been paid, but a record of satisfaction may have never been filed. There are so many issues that may appear during the search and the idea is to address any title issues before the property changes hands.
In the end, the title company ensures that the person selling the property to you has the right to do so - and that there are no defects in the title. So, what is title insurance? It is protection against anything that may have been missed during the title search.
Types of Title Insurance
There are two different types of title insurance: a lender’s title insurance policy and an owner’s title insurance policy.
If you are taking out a mortgage on the property, a lender’s policy is often required by the lender in order for the transaction to close. This type of title insurance protects the lender. After all, they are agreeing to give you a sizable sum of money to purchase a property - and they need to protect their interests in it. Lender’s policies are paid one time at closing and last for the length of the loan. As you pay your mortgage down, the value of the title policy decreases. Once you satisfy your mortgage (or refinance), the lender’s title insurance policy will no longer be in effect.
It is important to note that a lender’s title insurance policy does not protect you.
Another type of title insurance is an owner’s policy. This is the type of title insurance that looks out for you. It is also purchased with a one-time payment at closing, except this policy will last as long as you have an interest in the property - including protection for your heirs.
Do I Need Title Insurance?
The short answer is yes. While you don’t need to buy title insurance to purchase a piece of property (unless your lender is requiring a lender’s policy), it is highly recommended that you purchase an owner’s title insurance policy.
It does not matter how careful and thorough your title team is on the title search, it is always possible for a defect to reappear down the road - either right after closing or 30 years in the future. Without title insurance, your rights to your property could be in jeopardy. And, you could face a lengthy - and expensive - legal battle.
Sometimes things get missed in a search. A fraudulent document may have looked really legitimate. A large tax lien may have been improperly recorded by your county’s recording department. Or, a missing will may have recently been found. Whatever the reason, without title insurance, you are not protected from any of the what-ifs. But by choosing to make that one-time purchase at closing, you can have peace of mind that your property is yours for the long haul.
Are you required to protect yourself with a title insurance policy? No. Do you need a title insurance policy? Absolutely.
Title Insurance at Reputation First Title Agency
If you would like to learn more about title insurance or are looking for a title company to handle your real estate purchase, Reputation First Title Agency is here for you. We will guide you every step of the way to ensure that you are protected.
Contact us today at one of our two convenient offices:
Livonia (734) 432-0100
Shelby Twp (586) 612-5400