When purchasing real estate, most closing lawyers will tell you that title insurance is very important. In many cases, a real estate attorney does not even want to handle a sale in which the buyer insists that he or she does not need title insurance. This insurance protects both the buyer and the lender from serious financial loss if any unforeseen issues with the title should come up. Although a real estate attorney will conduct a title search at the beginning of the sale, there can still be problems with the right to ownership, or the seller’s right to sell the property, that the seller failed to disclose or perhaps was not aware of. Title insurance covers the buyer and lender in such an event. Here are some common questions and answers about title insurance:
How Could the Title Be Defective?
There are several issues which could exist that would make a title defective. Even if a closing lawyer has conducted the most thorough of searches, there can still be undisclosed issues with the title that did not show up in a public records search. These issues could include improper estate proceedings and/or other legal actions which may be still pending and therefore not show up in a query. Some of these problems may not materialize for months or even years after the sale of the property is final, and could cost the buyer thousands of dollars. In some cases, the property could still be lost to the buyer.
If the Lender Has Already Required Me to Have Title Insurance, am I Covered?
No. The type of title insurance that your lender is requiring you to have is most likely known as a “lender’s policy.” Just as it sounds, it covers the lender instead of the buyer. A lender’s policy only makes sure that the financial institution has a valid lien on said property. On the other hand, the owner’s policy, which is what you need, will protect you, the buyer, from any issues with the title that existed before you closed on the property. In the case of loss due to title issues, an owner’s policy of title insurance will reimburse the buyer the face amount of the policy and the costs of any legal defense required on the buyer’s behalf.
Is Title Insurance Very Expensive?
No. Considering the level of protection that it offers, title insurance is relatively cheap. It is not a premium that you must pay monthly, or quarterly, as auto insurance, but is a one-time payment that can protect one of your largest assets for the rest of your life, and the lives of your heirs should they inherit the property from you. The cost of this security is usually no more than most car insurance policies are for one year.
A real estate lawyer can help you to find the right title policy for your purchase. If you have any questions regarding title insurance, give us a call today.