The phrase title insurance gets thrown around quite a bit in the world of real estate investment. And for good reason - because it is, after all, an important step in buying a new home. Though with so many demands that must be met to reach a successful and smooth closing, you may be questioning - what is owner’s title insurance?
This highly recommended purchase at closing can benefit you for years to come. Let’s talk about it.
The Importance of Title Insurance
When you decide to purchase a home, a title search will be performed to confirm that the seller has the right to sell the property - and to ensure that the title itself is free from any issues or encumbrances. You want to purchase a home with a clear title.
The title agent will search the chain of title - all the way back to the very first deed. They will make sure that everything is in place as it should be without any issues. This is a way to lessen your risk in case there has been any fraudulent activity associated with the property or if any creditors are trying to attach to it in order to secure their payment.
With a clear title, you can confidently move forward with your purchase. Even some minor title concerns can be addressed and handled, clearing the title for the closing. Regardless of how thorough the search was, there is always a chance that something could be missed - and this could definitely impact your rights.
What are some of the most common title defects?
It doesn’t matter whether you have been living in your new home for five months or fifty-five years - sometimes there are title defects that appear when you least expect it that can threaten your right to title. A few of these include:
Erroneously recorded deed
Forged or fraudulent documents
Judgments
Liens
Easements
Encroachments
Without title insurance, you may be in for a big fight - and could potentially even lose your home. But with title insurance, you simply file a claim and have an experienced team handle the battle for you.
Types of Title Insurance
There are two different types of title insurance: an owner’s title policy and a lender’s title policy. While they both protect against the same title defects we just spoke about, the difference is in who they protect.
An owner’s title insurance policy is designed to protect the owner of the property - that’s you. If any title defects arise as the result of something missed during the title search, for instance, you will be protected both legally and financially. Your title insurance policy will work to protect your rights to title so you don't have to worry about it. It is in effect for as long as you own your property - and even protects your heirs, too.
A lender’s title insurance policy is different as it protects the lender. It is valued for the amount of the mortgage - and remains in place for as long as the mortgage is outstanding. This policy solely protects the lender’s interest in the property against any title issues that may arise.
Owner’s Title Insurance: Who Pays?
Owner’s title insurance is a highly recommended purchase at closing. Remember, it is a one-time fee that protects you as long as you have an interest in your home. The cost of the policy will vary as it is based on the purchase price, but it is usually always a reasonable fee - especially for the peace of mind you are receiving. So, who pays this cost at closing? It depends on the state - and even the county. For instance, in Michigan, it is customary for the seller to purchase the owner’s title insurance policy for the buyer. The same is true in Florida, with the exception of a few counties.
Learn More at Reputation First Title Agency
At Reputation First Title Agency, we understand that understanding title insurance can be a bit tricky. Whether you are looking to get started with a title search or you have questions about title insurance, our team of professionals can help.
Contact us today at (734) 432-0100.