We take so much on face value.
That guy whose house you are buying, for example. We assume if he is selling the house, then he owns it. He does own it. Right?
What if he’s really a renter posing as the owner? What if his ex-wife is still a co-owner? Well, if so the seller doesn’t have a clear title, and that means you won’t either.
Happily, for a plethora of problems that can occur with a process as complicated as buying a home, the buyer has insurance. It’s called title insurance, and it is one of the most important safeguards of your money.
If you want to buy a home, you have to sign a contract with the seller, a mortgage contract with your lender, another contract with your insurer and a few other related documents. Not only is this process time-consuming, but it can also cause sleepless nights fraught with worries.
Signed contracts by two parties are legally binding agreements. They cannot be broken without costly consequences and in something as significant as a home, you want everything to go right.
Lots of problems can creep up in a property over a dozen or more years. There can be unpaid taxes. Or a problematic easement that prohibits your building a fence. There can be disputes over a property line. What if the city has underground utilities running the entire length of the property that the seller didn’t reveal in the contract, and you don’t discover them until you’re excavating for a swimming pool?
Professional real estate agents and contract law attorneys work with property buyers and sellers every day. They can interpret the documents, ask the right questions, add or delete anything, not in your best interest, and recommend a title company to launch a thorough search that secures you a clear title. In fact, your mortgage lender requires the purchase of title insurance, or it won’t issue the funds you need to close the deal.
The title company’s main mission is to declare a title defect-free; otherwise, it won’t sell you the required insurance. The search involves combing through public records for any matter concerning the house you want, including past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments, outstanding liens and tax records.
Maybe the seller inherited the house under the terms of a will, but it was out-of-date, and a more recent will left the house to his cousin. Title insurance protects both your interests and your lender’s.
Title policy insurance is the best insurance policy you can ever buy. It is a permanent assurance that your ownership and use will be defended promptly against claims, at no cost to you, whether or not the claim is valid.
Every state and locality have a different regulatory rules that can affect charges. But you pay a one-time premium for coverage that lasts as long as you or your heirs own your property. Title insurance is one of the least expensive forms of insurance.
