Title Insurance -
Importance of Title Insurance
When purchasing a home, the buyer acquires title to the property. This title includes the right of ownership and possession of the land. Sometimes, however, the buyer’s rights to the property may be limited by claims asserted by others. If these potential claims are not caught and corrected before buying, they may limit title to the property, have a negative impact on the value of the home and threaten the interest that the homeowner and mortgage lender hold in the property.
Acquiring Title Insurance:
Title insurance is a welcomed “security blanket” for home-ownership because of the significant investment the homeowner makes when buying a home. Purchased as a one-time expense, homeowner’s title insurance covers homeowners against loss due to potential preexisting liens and hazards that may not be uncovered in a general title search. Although lenders do not require purchasers to buy homeowner’s title insurance, it is essential in order to protect the homeowners’ interest. Lenders do, however, require purchasers to buy for the lender, a lender’s title insurance policy to protect that lender’s security interest.
The Importance of a Title Search: Despite the expertise and dedication that go into a title search, hidden title defects can emerge after completion of a real estate transaction, leaving the buyer without a clear title. Title defects can be an unpleasant and costly surprise.
Some examples include:
- Previously undisclosed heirs with claims against the property
- A forged deed that doesn’t transfer title to real estate
- Instruments executed under an expired or fabricated power of attorney
- Mistakes made in public records
Obtaining title insurance is a simple step buyers can take to protect themselves against loss or damage due to potential problems with the title to their property.
Title Search
Researching a Title:
The title company will perform a title search before issuing a title insurance policy. This process searches the history of public records of the property. The search results may uncover items that need to be corrected before clear title can be conveyed, such as:
- Outstanding mortgages, liens, judgments and tax liens
- Deeds, wills and trusts that contain improper vesting and incorrect names
- Improper notary acknowledgements
- Easements and restrictions
The title company will then issue a preliminary report on the property, which gives the buyer, seller, and lender an opportunity to review any potential title defects that are to be cured or matters to be shown on the title policy.
