Buying a home is an important investment. For most of us, it is the single biggest financial investment we will make in our lives. Title Insurance is what protects a buyer's financial interest in their home from loss associated with title defects, liens, unpaid prior taxes, claims of ownership by third parties, and other such matters. It is the most effective, most accepted, and least expensive way to protect a buyer's home ownership investment. When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from undisclosed liens not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights.
Throughout the years, your new property may have changed hands many times through sale, inheritance, foreclosure or bankruptcy. Each transfer was an opportunity for an error to be made, or liens against the current owner to attach to the property, or other issues to arise. If an error occurred and has never come to light, it puts the title to your property in jeopardy. And even though a title company may have performed a very thorough title search, sometimes unknown or unrecorded matters can put your ownership at risk. These unforeseen issues are where an Owners title insurance policy will give you protection and peace of mind.
A few of the most common title claims that could affect property include:
How much does it cost?
Because it is a highly regulated industry, base title insurance policy premiums are published with the state’s Department of Insurance. These premiums should be fairly consistent from title company to title company. However, there are certain situations where the premium a title company can charge may vary, such as if the property has been covered by a prior title policy in the last 5 years. In general, the cost of each policy is based on the purchase amount of the home (for an owner’s policy) or the total amount of the loan (for a lenders policy). Additionally, there is usually a tax that applies to this premium, which is not paid to the title company but to various municipalities that have jurisdiction. The premium for the title policy is paid at closing and is included in funds the buyer brings into the closing (the “cash to close” amount), or is included as part of the closing costs for the loan. Please call our office for a quote based on your specific transaction.
The payment of a title insurance premium, unlike other types of insurance, only happens once; there are not future premiums to pay as long as the homeowner (or their heirs) hold an interest in the property (as to an “Owners” title policy), or as long as the loan is still in effect (as to a “Loan” or “Lender” title policy). That means that this fee, generally paid when the buyer purchases the property or takes out the loan, will protect the homeowner and their family indefinitely for so long as they hold an interest in the property.
On a refinance, your lender will likely require the homeowner to purchase a new loan policy, as this type of insurance protects the lending institution for the life of the loan. A loan policy, however, does not provide any coverage for the owner of the property; it only protects the lender’s interest in the realty. This is why an owner and lender title policy are usually purchased at the same time. An owner’s policy will remain in effect even after the loan is paid in full.
Forgery and impersonation;
Lack of competency, capacity or legal authority of a party;
Mistakes in recording of legal documents;
Undisclosed or missing heirs;
Erroneous or inadequate legal descriptions
Misrepresentation of marital status
Undisclosed but recorded federal or state tax liens
Undisclosed but recorded prior Mortgage
Clerical errors in public records;
Wills not probated;
Unpaid but non recorded Homeowners Association Liens.