Title Insurance….it’s that “black hole” in your real estate transaction that most don’t know what it is or why it is required. But, it’s really not that complicated. Here are few points that help define title insurance and explain why it is needed and required.
What is title insurance?
Title insurance is your policy of protection against the loss should a claim be made against your ownership because of fraud, forgery, judgments, unpaid real property taxes, liens, or other defects in title. If you are buying a piece of property, you want to make sure you really own the property when the transaction is completed. If you are a lender, you want to make sure your mortgage is, in fact, a valid lien. Title insurers carefully examine the history of the property’s title and issue a policy that protects the interested parties against the potential of loss from title defects. Think about it like this…..insurance coverages such as life and auto protect you from things that may occur in the future. Title insurance protects you from things that may have occurred in the past.
What is a title search?
A title search is a detailed examination of the public records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller’s right to the transfer of ownership, and to discover any claims, defects and other rights or burdens on the property. Many companies search the “chain” of title back 40 years or more. One in four title searches finds a title problem that is fixed before the transaction closes and the insurance is issued.
I’m refinancing. Why do I need title insurance?
When you refinance you are obtaining a new loan, even if you stay with your original lender. Your lender will require Lender’s title insurance to protect their investment in the property.
Even if you recently purchased or refinanced your property, there are problems that could arise with the title. For instance, you might have incurred a mechanics lien from a contractor who claims they have not been paid. The lender needs reassurance that the title is clear to the property they are financing.
What does title insurance cost?
The cost varies, depending mainly on the value of your property and the state in which it is located. Some states are regulated and some are negotiated. The important thing to remember is that you only pay once, and the coverage continues in effect for as long as you have an interest in the property. If you should die, the coverage automatically continues for the benefit of your heirs.