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New Property Owners Guide to Title Insurance

Thursday, June 25, 2020

Approximately 25% of residential real estate transactions have title issues. This means that you have a one in four chance of having title issues when you buy your next home. 

These issues present a risk of you losing ownership to a part of or all of your real estate investment. Considering that this is one of the biggest purchases of your life, title insurance is a must. 

This guide will help you understand what title insurance is and how it can protect you. 

What Is Title Insurance? 

A title insurance policy protects the buyer and mortgage company during the purchase of a piece of real estate. When a buyer and seller agree to a contract of sale, title insurance is secured during the process. 

Why You Need a Title Insurance Policy 

Having real estate title insurance is optional if you don't plan to finance your purchase. But even in this situation, you will want to secure a policy. 

Mortgage companies require title insurance because it protects both them and you in the event of a mistake or foul play. While title agents are heavily regulated, not everyone is honest, and mistakes can happen. 

If either of these situations happens to you, title insurance will protect you. This could be someone losing a deed, failing to record, incorrectly filling out documents, or even falsifying documents. 

Here are some common real estate related documents that can present issues:

  • Incorrect notary acknowledgments 
  • Easements 
  • Pending legal actions 
  • Deeds or wills with incorrect wording or names 
  • Outstanding judgments or mortgages 
  • Outstanding liens 

These actions can compromise your title and complete ownership of your property.

What Does Title Insurance Cover?

If you discover a defect in your title or someone lays claim to your property, then you'll need to make a claim. While title insurance providers vary in their exact terms, they all generally cover the damages and costs associated with the fixing of the issue. 

This could include going to court to determine the rightful owner of a piece of property. Or it could be recouping the loss in value due to someone else having rightful ownership. 

The lender policy will typically cover an amount equal to the amount financed. This means that the policy value will reduce in accordance with the repayment of your mortgage. When the mortgage is completely repaid, the lender policy is eliminated. 

An owner policy remains in full value and effect for the life of the ownership. That way, it continues to protect the property owner for as long as they own the property. 

One important distinction about this type of insurance is that it only covers defects that occur before you take ownership of the property. You'll want to save this paperwork in case anything happens in the future. 

Who Pays for Title Insurance? 

The buyer of the real estate typically pays for both their owner's policy and the lender's policy. In some cases, you can negotiate for the seller to pay for these costs. 

Secure Title Insurance Today 

If you plan to buy any type of real estate, then you need to have an owner's title insurance policy. That way, you can protect your investment. 

We can help you secure the best policy with the coverage you need. That way, you can complete your real estate purchase with confidence. 

Contact our team today and let us help you secure title insurance for your real estate purchase.   

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