If you are investing in a piece of property and working with a title company, then you are going to be asked if you’d like to purchase owner’s title insurance. With closing costs adding up, you may be quick to decline. However, before you do, there are a few things you should know.
This article explores owner’s title insurance and why you need it.
The Importance of Owner’s Title Insurance
As soon as you sign the sale agreement, a title search is done to confirm that the seller is the rightful owner of the property and can legally sell it. But this deep dive into records doesn’t stop there.
Title examiners are looking for anything that may cloud the property’s title, such as liens, judgments, easements, and the like. They then do what they can to clear up all the issues so that you may move forward with the sale.
But what happens if there are still title defects that didn’t show up during the search? For instance, what if a lien was erroneously recorded or if there was a missing will? The list of potential title defects is long — and they can threaten your rights to your property.
Should they arise after you become the owner, it will be your responsibility to fight for your property. This could get expensive and may even turn into a legal battle. All without any guarantee that you will win.
Owner’s title insurance plays an important role in this situation. If you have the coverage, you would simply file a claim and everything would be handled on your behalf.
Types of Title Insurance
There are two main types of title insurance — an owner’s policy and a lender’s policy. While they both protect against title issues, the specifics of each will vary. As you go through your real estate transaction you must understand the difference so that you remain fully covered.
An owner’s title insurance policy protects the owner, as well as their heirs, for as long as they have an interest in the property. Should any title issues arise, legal and financial coverage will be in place.
A lender’s policy, on the other hand, is there to reduce the risk lenders take when agreeing to provide a loan. Should something go awry, the insurance saves them from loss of the outstanding mortgage amount.
Most lenders will require you to purchase a lender’s policy as a condition of your loan. And, if they do, you must understand this type of insurance only protects the bank, not you. You will need to purchase an owner’s title insurance policy to protect yourself from any potential catastrophic loss.
Who Pays for Owner's Title Insurance?
Although it can vary based on region, owner’s title insurance is usually an optional coverage. However, it does come highly recommended by those in the industry who have seen the devastation faced by owners who decided to forego the coverage.
In the state of Michigan, it is customary for the seller to purchase the owner’s title insurance policy at the closing. It is one less thing for the buyer to have to worry about.
Don’t Miss Out on Owner’s Title Insurance
Whether you want to learn more about owner’s title insurance or you are getting ready to buy a property and want coverage, the team at Blue Pointe Title Agency is here for you. We can answer any questions you may have. Then, when the time is right, we can issue your owner’s title insurance policy so that you will have peace of mind for years to come.
Contact us today!
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