10 Aug Title Insurance
Today, I had a great reminder why we get title insurance. We rarely hear anyone talk about it. You interview Real Estate agents, you shop for a loan, but do you ever ask what title company will be facilitating my closing and why? What the title “insurance” policy covers?
Did you know there is a difference between getting title work and making sure you have a policy?
A title insurance policy ensures your right to own and occupied the space that you are about to purchase.
I have run into situations where the deed was not signed off on at a tax sale, where liens were not paid off and/or discharged and the new owner could be responsible for that lien if not taken care of, or have a heavy court expense removing it.
Having a title insurance policy can reduce your risk, basically, for 2 reasons, the title company is probably not going to insure unless all “clouds/liens are removed and if a mistake is made, in most cases you will have insurance to fall back on to protect you.
However, I said most cases. Some title companies will not warrant the policy – be sure you know what you are getting – and ask the hard questions. What do they cover and how will they take care of mistakes – IE: clerical and financial – Did you know in my area that the water bill is a utility that is a lien against the home? So if you are not making sure the water bill is paid, or enough is held into escrow at closing to pay that final water bill you – the new homeowner will be responsible for the seller’s bill! There are more situations like this you may not be aware of.
I have seen for sale by owners try to save money and forgo the title insurance (cash buyer) only to find out they inherited some liens. Ignorance is not going to protect you – it will be a costly battle.
Some title companies offer services for after the closing – for one, an online portal to keep all of your loan documents – now how many of us have lost that stuff in a move?
Below are some examples of what the title company is looking for – but there could be more. Do not be afraid to ask the questions, be sure the team that is working for you is protecting you.
- Deeds, wills, and trusts that contain improper wording or incorrect names
- Outstanding mortgages and judgments, or a lien against the property because the seller has not paid taxes
- Easements that allow construction of a road or utility line
- Pending legal action against the property that could affect a purchaser
- Incorrect notary acknowledgments
- A forged signature on the deed, which would mean no transfer of ownership to you
- An unknown heir of a previous owner who is claiming ownership of the property
- Instruments executed under an expired or a fabricated power of attorney
- Mistakes in the public records
Be sure you have an Owner’s Title Policy and understand what it covers! It’s important!