A title insurance policy is a contract that ensures a buyer's ownership/interest in a specific piece of real property (a home, land, etc). This insurance protects you from loss based upon an encumbrance, defective title, or adverse claims made against the title for as long as you and/or your heirs own the property, and in some cases, even longer. Here are some additional things you should know.
1. Who Pays For It
The custom in our area is for the seller to pay for the buyer’s title policy and the buyer to pay for the lender’s title policy. There are three different types of title policies that provide differing levels of coverage. The default policy is typically what you want, but there is a less expensive (with lower coverage) and a more expensive (with additional select coverage). It depends on the property you are purchasing – something to discuss with your real estate broker or the title officer.
2. Title Search and Exceptions
The title company will do a detailed search of all historical records concerning the property – including deeds, court records, tax records, etc. They will then verify the seller’s right to transfer ownership and attempt to discover any claims, defects, rights or burdens that affect that property and that information will be provided to you in the title report. Make sure you read all of this and ask the Title Officer to explain anything you don’t understand.
3. Marketable Title
When you purchase a home, the default is for you to purchase the home with clear and marketable title. This means that any known or identified claims against the home’s title, shall be resolved and, if needed, paid before closing or out of the closing proceeds.
4. Title Contingency
A title contingency in your purchase and sale agreement, provides you with the right to review the title report and if there is anything that you don’t like, you can get out of the contract. This is subjective, because you are determining if the rules, conditions, and/or easements impact the way you want to use the property – it may not be a problem for someone else. For example, the community may not allow chickens which could be a deal breaker for you, but others might welcome that rule.
5. Title Insurance Policy Protection
So if there is an extensive search done before and during the contract period, why do I need insurance? There are "hidden hazards" that even the most diligent title search may not reveal – and those claims are what you want to be protected from. Here are two such examples: (a) A prior seller misrepresented their marital status, resulting in a possible claim by a legal spouse; (b) the seller might not have been mentally competent to sell the house and the heirs dispute it. If there is a valid claim, and your policy covers the title problem, then the title company may defend you in court (at their expense) or indemnify you against monetary loss or damage due to the covered title defects.
It is important that you work with a Real Estate Broker who has the expertise and the team of experts that they can provide to you, to help you make fully informed, great decisions. If you’d like to explore your buying or selling options, contact The Blue Team at www.BlueRealEstateTeam.com.