“Why You Need Title Insurance”
My friend just bought a multi family from me. After we closed and he toured his new investment property, there were things he noticed for the first time because, as he said, “I was more concerned with the things I had to do before I could close, like having all the money I had to bring to closing, and buying my homeowner’s insurance.” Title insurance is another one of those things you need to get before you close and you hope you never have to think about it again.
While working with Quicken on a mortgage application, I received several calls from my contact until I provided him with the name of the title insurance company our mutual clients would be using. Of course my clients had no idea this was going on, because their attorney, like so many attorneys, acquired title insurance for the buyer and then just added it to the HUD-1 Settlement statement.
So what is title insurance besides another expense at the closing table and why is it so important to the lender? Title insurance protects the buyer and their mortgage holder fr0m losses due to clouds on the title. Sounds romantic, clouds on the title, until someone steps forward to contest your fee simple right to enjoy your property.
Title insurance companies make sure that no one else can claim ownership of your home due to unpaid property taxes, including water liens, unpaid mortgages, mechanics liens, right of way easements, or child support liens, just to name a few. In upstate NY, homeowners had to insure against Indian Tribes claiming rights to their land.
What makes title insurance so different? Title insurers only charge a one time fee which pays for a title search professional to identify and repair problems that occured in the past. Title insurance has lower loss rates because it’s preventive, and your title insurance converage is in effect for as long as you or your heirs own the property.
One of my clients filed a claim against her title company when an unrepaired defect prevented her from reselling the property. Another client found out her lawyer never paid for her title insurance until an issue arose and she had no recourse.
You have the right to chose your own title professional and don’t need to leave it up to your attorney or mortgage provider.
- Utah Court of Appeals: Title Insurer Did Not Act as Abstractor, Not Liable in Tort (thefullfifty.wordpress.com)
- It’s All In Your TITLE (cleartitleaz.wordpress.com)
- Family: Title insurance saved our home (kshb.com)
- Dispelling Myths: What Every Realtor Should Know (Jeremy Yohe)