You know about homeowner’s insurance and why it is essential, but do you know why title insurance is necessary? When purchasing a home, it is important to have a clear title. The title gives you ownership of a property and if you discover that the previous owner didn’t pay property taxes or pay the contractor in full you will not be able to close the sale of your home until the taxes and liens are paid in full.
You might even find that the power or gas company decides to use an easement to go through your backyard. Many scenarios could cause problems and tracking down every eventuality is impossible unless you have title insurance.
Briefly, owner’s title insurance protects you if someone shows up and contests your ownership of the property.
Take for example a case several years ago where the residents of an entire subdivision almost lost their homes. A woman claimed she was a part owner of the land that was used to form the subdivision. She sued all the homeowners in the community for a partial share of the land. She eventually agreed to settle, but the homeowners paid thousands of dollars in legal fees to defend their property rights. If these homeowners had purchased title insurance at the beginning of their home purchases, they would have been protected from loss, and the title insurance company would have defended them from ownership challenge.
Title insurance doesn’t work the same way as your homeowner’s policy. You pay a one-time fee with a title insurance company and your property is covered for as long as you or your heirs own the property. You will need to purchase a lender’s title insurance to cover an investment. The lender wants to ensure this is a legitimate deal and the seller has the full rights to sell the property. You will also want to purchase a policy that covers your interest. You can buy the owner’s policy and the lender’s policy together. The two policies give you coverage and peace of mind that the title is okay.
It is rarely that title insurance comes into play. Most title insurance companies incur expenses upfront, and this prevents any title surprise later.
While you are in the escrow phase of buying a property, the title insurance company conducts a comprehensive search to ensure that no surprises are lurking in the files that will cause you problems. The title company researcher will look at deeds, wills, and trusts and trace the history of the property back as far as he/she can. The search can be completed on a computer or manually. A type of search will depend on the records in your area. Questions answered include, are there prior liens on the property? Is there an easement on the property? What about previous or pending legal issues?
There are premiums you pay to the title company pay for this research. To make sure you are protected; the title insurance will cover your losses if it turns out later that they missed something.
The title search and title insurance costs can be lumped together to help save you headaches and money.
When looking to purchase title insurances, ask these six questions:
• Are the prices on title insurance regulated? In many states these prices are regulated so there is not much of a price difference among title insurance companies. Consumers will find that the quality of the insurance and the quality of the title search are similar. Find a title company like Utah Title that will do a thorough search and will still be around in 10 or 15 years if there’s a problem.
• How much title insurance do you need? Typical title insurance policies protect you against fraud, forgery, undisclosed heirs, and spousal claims. Additional coverage could boost costs. These costs could also include protections against the construction company if they inadvertently violated the restrictions of the subdivision. A title search was done on a property for sale in a community. The title search revealed that the property lines were improperly laid out. The contractor had inadvertently given six inches of property to one neighbor over another. The title search discovered that the discrepancy caused these six inches to be purchased by one of the neighbors. Litigation insured and the seller bought the six inches of property and deeding it over the buyer.
• Who pays the title insurance? Generally, the party responsible for paying for the policies – the buyers and the lenders – varies from state to state. Look at the rules and regulations of your state and ask Utah Title Insurance this question. They will give you a straight answer.
• Do you may select the title insurance company? You have all the rights to choose the company you want to do the title insurance and search. If a seller is trying to push a company, be suspicious.
• Who should you trust in purchasing title insurance? If your real estate agent and your mortgage lender are giving you advise, it is often prudent to go with the lender. The lender is guaranteeing a lot of money, and the assurance that the property is yours is protection for them.
Title insurance does protect you from unexpected liens that could come up later and were missed during the search. Title insurance also protects your actual title if there is ever a dispute about lot lines. Most home buyers, realtors and mortgage companies recommend title insurance. It is not expensive, and you may never use it, but if problems do come up, title insurance will save you the headache of spending your life savings trying to defend your property rights. A reputable company like Utah Title will guide you through the pitfalls of searching your title and getting it insured. Don’t let things go to chance. You need title insurance. Note that when you need it, title insurance companies pay out promptly and for a goodly amount.