From the time you sign your contract until the date of your closing, you will learn a lot about the property you are trying to purchase. This is thanks to the inspectors, the title work, and so on. All of this is done to make sure that the property you are buying is living up to its value - and that it is a sound investment.
One important step is to make the decision about whether or not to purchase title insurance. So, knowing what it covers can always be very beneficial.
Understanding Title Insurance
When you sign an agreement to purchase a piece of real estate, a title search is done. This is a thorough look at the history of the property to ensure that there are no issues with the title - and that the seller has the authority to sell the property.
Any time there are outstanding taxes, judgments, liens, and so forth, they attach to the title of the property. If found during the title search, they will need to either be cleared up prior to the closing or as a condition of the closing. For instance, if there is a recorded judgment that shows up in the title search, a payoff will be obtained and it will need to be paid before the new owner takes ownership.
Once the title search is completed, a title commitment will be drawn up offering a title insurance policy based on the findings. Again, it could list specific conditions that must be met first.
Title insurance protects you against anything that was missed during the title search. For example, if the judgment mentioned above was missed, then it would become your responsibility as the new owner - even if it is in the name of the previous owner.
With title insurance, you’d simply file a claim. Without it, you could be looking at a lengthy and costly battle if you try to fight it. And there is no guarantee that you would win.
Types of Title Insurance
There are two main types of title insurance - an owner’s policy and a lender’s policy. Both offer protections and require just one premium payment at the closing.
An owner’s title insurance policy protects you as the owner. It remains in effect for as long as you or your heirs have an interest in the property.
The lender’s title insurance policy is put in place to protect the lender. They are taking a risk when loaning you the money for the purchase and this insurance reduces that risk. Once the loan is satisfied (even during a refinance), then title insurance is closed out.
What Does Title Insurance Cover?
Title insurance is used as a means of protection by the owner and the lender. It protects against any loss or damage that could arise due to something missed in the title search. After all, a title search covers a lot of history for a property. And, sometimes things get missed -
Missing or unsettled will
Unknown heirs
Outstanding taxes
Forged or fraudulent documents
Erroneously recorded deeds
An easement due to a restricted covenant
And that’s just to name a few.
There are so many things that may come up after the property has changed hands. The best way to protect yourself - and your investment - is to invest in title insurance.
Title Insurance at Blue Pointe Title
At Blue Pointe Title, we understand that going through the home-buying process when you are new to it can be a bit confusing - but not knowing what title insurance covers could put you at risk. Our title experts are with you every step of the way to answer your questions and address any concerns you may have.
To learn more, contact us today at 517-258-1511.
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