What is Title Insurance?
- A form of indemnity insurance that protects lenders and homebuyers from financial loss sustained from defects in a title to a property.
- Protects the lender and homebuyer against loss or damage occurring from liens. encumbrances, or defects in title or actual ownership of property.
- One-time fee that covers pricey administrative fees for deep searches of title-data to protect against claims for past occurrences
Most common:
- Lender's title insurance is the most common as it not only protects the homebuyer, it also protects the lender and the bank. Purchased by borrower. Lender will be covered up to the amount of the mortgage.
- Owner's title insurance is paid for by the seller to protect buyer's equity in property.
What does it cover?
- Ownership by another party
- Incorrect signatures on documents, as well as fraud and forgery
- Flawed records
- Restrictive covenant (terms that reduce value or enjoyment), such as unrecorded easement
- Encumbrances/ judgments against property, such as outstanding lawsuits and liens
What are the risks of not having it?
- Exposes transacting parties to significant risks in the event a title defect is present.
- Without it, financial burdens goes to homebuyers- either pay what is due or risk losing home to taxing entity.
A clear title is needed to close any real estate transaction. A title search will bring up any claims filed, including back taxes (mortgage loans, Home Equity of Credit(HEOC), and easement) and conflicting wills. If anything is found that risks losing
the home, the title insurance should cover it!
