Title insurance is an important part of a typical real estate closing. The protective measure insures the property title for the benefit of the purchaser. Many first-time home buyers or investors don’t fully understand the necessity of title insurance. If you need help understanding this important measure, the following information will help you gain a basic understanding of title insurance.
The initial search
When a property is bought, sold or financed, a record of the transaction is typically filed in public archives. Also archived are other events with the potential to affect ownership, such as liens or levies. If you buy title insurance for your property, a title company will search these archives to find and remedy any type of ownership issue. Issues such as wills, deeds, or trusts containing incorrect names or improper vesting are sometimes found. These issues can be fixed before closing on the property.
The underwriter will determine whether the title can be insured after the search is complete. The search minimizes the risk of offering insurance and allows you to fix any issues before you purchase the property. Once the risk of offering insurance is minimized, the insurance company can offer a reasonably low, one-time fee.
What title insurance covers
Title insurance covers any events that occurred before the insurance was issued. Let’s say there is a lien for taxes not paid by the owner of the property, but the owner has not owned the property for 60 years. You may have coverage under your insurance policy to deal with such an issue.
You could lose the right to your own property because of fraud, errors in previous deeds, or forgery. The owner’s policy protects the purchaser from any covered risks, such as those above, listed in the policy.
Why title insurance matters
If you, the purchaser, did not have title insurance, several different scenarios could cause issues for you in the future. One serious problem would occur if the seller knowingly sold you a home he or she didn’t actually own. In cases such as this, renters have posed as sellers.
Typical title issues are not as extreme. For example, your seller may have co-purchased the home ten years prior with a brother they haven’t spoken to in years. The seller may be unaware they need to get the brother’s signature to sell. Your policy may also step in to help if there were liens filed against the house. Generally, these debts include child support, taxes, and contractor’s fees.
Covenant Title Company
Covenant Title Company, a subsidiary of FirstBank Southwest, is staffed by skilled professionals with combined experience of over 100 years. We have provided title services since 1997. Contact Us with any questions you may have about insurance.