If you are in the process of buying a new home, then you might have heard the importance of getting title insurance. It is among the list of standard procedures taken by homeowners before the completion of a home purchase deal. It is important for homebuyers since it protects their rights to the home and safeguards the lender from any mishaps that occurred during previous ownerships. Keep reading below to know more about the importance of purchasing title insurance when you buy a house.
What Is Title Insurance?
Anytime when a home or any other property undergoes the process of buying or selling, there is the mention of that transaction in public records. If you purchase title insurance, they will perform comprehensive research on the public records related to this property to find out any defects related to the ownership. It requires you to pay a one-time premium during the deal closure to offer you protection until you hold the title ownership to that particular property. If you face any kind of issues with regards to the title rights to that home after the deal closure, the title insurance policy will cover you against any kind of losses.
A process called “title search” is performed by the title insurance firm as your purchase the property. It will consist of performing a deep study on the real estate records of the state of that specific home location. This will disclose any claims, liens, mortgages, ownerships, unpaid taxes for any previous legal verdicts. After completing the title search process, the title insurance company will either agree to sign the policy or mention any defects related to the tile. But there may be some hidden defects that may not be found even with the deepest title search by its firms. But once the agreement is done, title insurance firms will take care of the losses that occurred from all the issues that are mentioned in the policy.
What are the defects that are shielded by title insurance?
It will protect the buyer and the lender from incurring losses due to issues in the title of that property, as below:
- Any kind of forged deed or record and any kind of other fraudulent activities.
- Encroachments initiating from the property.
- Pending liens to workers who have worked on the property.
- Any issues related to the title, such as a hidden heir.
Title insurance is of two types based on the needy being an owner or a lender. Most of the lenders will require the owners to buy a lender’s policy if they need to take a loan from the mortgage. This policy will cover the lending loan amount in case of any issues that come up with relation to the title of that property after loan financing. This type of insurance will be in effect until the loan amount is cleared, the owner sells the home, or refinance it. But the owner’s policy is not compulsory and will secure the total value of the amount paid for that particular property. As mentioned above, this policy will safeguard a wider range of issues for that property.
How can title insurance benefit homebuyers?
Below are some of the specific events which require protection from title insurance to give peace to the buyers:
Shielding from issues of uncertain title ownerships:
Even with careful considerations, there are possibilities that public records would not contain every detail of the transaction concerning that property. There may be some purposeful fraudulent activities that may have occurred on that property. It will protect the title ownership from any such defects and give peace to the homeowners. Further, the policy will mention any undisclosed ownership details of that property and take sole responsibility for the listed coverages.
Fulfills all the required laws: Homeowners, landlords, developers, etc., must purchase the title insurance as per the Real Estate (Regulation and Development) Act, 2016 (RERA). By purchasing title insurance, buyers will get better value to the property and find easy financing options.
Avoids any load occurring from Lawsuit charges: Several issues to a specific property may arise after the actual purchase. They may lead to huge lawsuit charges causing a burden to the owners that may be even more than the actual investment. Title insurance will safeguard the buyers from all such issues mentioned in the agreement and avoid the load by covering all the charges. This will consist of all the charges concerning documentation, legal charges, and similar others.
Saving cost and time: Completing any kind of real estate transaction will consist of paying a certain amount for involved charges. In case of rising defects after completing the deal, you have to pay the huge charges and waste huge time on carrying out the lawsuits. Title insurance will act positively in such situations by providing legal aid in any kind of payment. Paying a premium for one time during the deal closure can come to your help hugely by saving you from all the defects for the title insurance.
Safeguard the property: Securing your home with title insurance will enhance the property value in two types. One by protecting the title rights of the owner, and another by assuring the lenders to finance the deal to that home. A homeowner cannot miss taking title insurance, even when it is not mandatory.
To wrap up:
Even if the expert closing lawyers are confident, there are chances of missing any hidden issues that may haunt you in any later stages. Since buying a home is probably one of the biggest financial investments that you may execute as a buyer, it is better to have insurance to safeguard your investment and get peace in life. Contact a trusted title insurance company such as Utah Title insurance company to help you avoid financial trouble in later stages.