Avoid Costly Mistakes: The Critical Role of Title Insurance in Real Estate
Protecting Your Real Estate Ownership Rights
What is Title?
What is the Title Process?
What is Title Insurance?
Why is Title Insurance Needed? What does Title Insurance Do?
Summary
What is Title?
When you purchase a property, you receive a bundle of rights. Those rights are called Title.
Title is the evidence that a person or entity has a right to possess, occupy, own and use a piece of real estate. Someone other than the current owner can have a legal right to a property. Sometimes that right is legitimate and expected, such as a lender's right to foreclose on a delinquent mortgage and take possession of the property. However, other rights and claims on your title can result in lost money and even the loss of your property.
What is the Title Process?
The history of a property is called the Chain of Title.
That history is researched and reviewed to determine the condition of title. This is called the Title Search and Title Examination.
Sometimes there are problems with the Chain of Title. These are called Defects or Clouds on Title. Once these defects have been identified, they can be fixed.
The process of fixing these defects is called Conveyancing. A Conveyancing company, separate from your title agency, might be involved in your transaction. A Conveyancing company will address the most common defects in title such as unpaid taxes, open mortgages and unpaid municipal services such as water and sewer and bills. While these services are a necessary and valuable part of the property transfer process, they encompass only a portion of the work done to provide clear title to the new buyer. Ultimately, the responsibility for making sure all of that work is done properly lies with the Title Agency.
What is Title Insurance?
Title Insurance is an insurance policy that protects a property owner when the condition of Title is different than is stated in the policy. Title Insurance protects you from defects and claims to the Title to your parcel of real property.
Title insurance differs from other types of insurance in 2 key ways. The first is that the policy is a one-time fee that is paid at closing. While the functions of most other forms of insurance is risk assumption of unforeseen future events by pooling the risk for loss, the main purpose of title insurance is to eliminate risks and prevent losses arising out of events that happened in the past.
Most defects are uncovered and fixed during the review process prior to closing. However, the history of a property can be very complex. Full and accurate records are not always available. An unresolved defect can cost you thousands of dollars or even result in the loss of your property.
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Why is Title Insurance Needed? What Does Title Insurance Do?
Defects exist on nearly every property every time it is sold or refinanced. Common defects are fixed as part of the title insurance process prior to closing. This activity alone is reason enough to involve a title insurance company in your deed transfer or sale. For example, a prior property owner can have unpaid property taxes, construction bills, or a previously unpaid mortgage. Any of these problems can result in a lien against the property. A lien is an amount of money that must be paid to the lien holder by the owner of the property. This means unpaid bills incurred by a previous owner can become the responsibility of the new owner to pay. Fixing these defects and ensuring these bills are paid prior to completing the purchase of a property protects the new owner from these debts.
If a defect is not discovered, it can cause a problem with the title. Defects in title can be very complicated and very expensive to resolve. A title insurance policy helps cover the cost of resolving the problem. These problems are called Claims. While car or homeowners' insurance claims can be small, often a few hundred dollars, title claims, while rare, are often for tens of thousands of dollars. It is not uncommon for a title claim to be for the full value of the property.
What would you do if a mortgage had been taken out by the previous owners and now the lender expected you to pay for it? Title Insurance protects against claims like that.
Other examples of risks against which standard title insurance may protect you include unpaid judgments, taxes and municipal services, undisclosed or missing heirs, use restrictions, forged documents, signatures of minors or mentally incompetent persons, fraud, clerical errors, wills not probated and more.
Protect the biggest investment of your life with Title Insurance. Protect your property rights for peace of mind that only title insurance can give.
Defects exist on nearly every property every time it is sold or refinanced. Common defects are fixed as part of the title insurance process prior to closing. This activity alone is reason enough to involve a title insurance company in your deed transfer or sale. If a defect is not discovered or is not discoverable through the title search, later it can cause a problem with the title. Defects in title can be very complicated and very expensive to resolve. A title insurance policy helps cover the cost of resolving the problem. These problems are called Claims.
In conclusion, understanding the role of title insurance is essential for safeguarding your property rights. Title insurance not only protects against undiscovered defects in the chain of ownership but also covers unforeseen claims that could jeopardize your investment. From unpaid taxes to hidden liens, title issues can have serious financial consequences if left unresolved. By securing a title insurance policy, you ensure peace of mind, knowing that any legal challenges or discrepancies will be handled, allowing you to confidently move forward with your real estate transactions.
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