Buying title insurance is an important part of purchasing real estate. Whether you’re buying a new home or a commercial property, title insurance provides financial protection in case a question of ownership arises. If you are a first time buyer, you may need assistance with title insurance. This guide to buying title insurance will help you with this step in the process.
What is Title Insurance?
The title is the document that states ownership of a property, otherwise known as the deed. The title is the legal concept of ownership and the deed is the paperwork that shows the transfer of ownership from one party to another. Title insurance protects all parties covered by the policy from financial implications of a title encumbrance (contested ownership).
Is Title Insurance Required?
If you are purchasing the property with a loan, the lender will require you to purchase title insurance in the form of a lender’s policy. This policy will only protect the lender from financial implications of a title encumbrance. It does not protect you, the buyer. You have the option to purchase your own title insurance policy to protect your financial interests.
Do I Need Buyer’s Title Insurance?
When the owner sells the property, they must have legal documentation to show that they are the sole owner of the property. If ownership is contested, meaning that another party also claims ownership of the property, there can be a legal issue. There can also be liens placed on the property due to other circumstances, such as mechanics liens for unpaid work done on the home, which means the property is not free to be sold. This can result in financial losses for all parties involved in the transaction. Buyer’s title insurance repays you for your losses up to the amount covered by your policy.
What is a Title Search?
Before a property can exchange hands a title search must be done. This involves going through the title records for a property to establish a clear chain of title. When all goes well, there is documentation of every owner of the property and every exchange with no missing records or periods of time when ownership cannot be proven. However, in some cases there are gaps in the chain of title or liens on the property due to unpaid debts, and that’s when things get messy. Even with a thorough title search by a professional, legal issues can arise.
Where Should I Purchase Title Insurance?
Now that you understand the importance of title insurance, you may be wondering where to get it or who to purchase it from. Look for a reputable title insurance company who offers a variety of policies to meet the varying needs of clients. Find an affordable policy but be sure it provides the level of coverage you need to protect your financial interests should something go wrong with the title. Also take into consideration what your title insurance company does for you in addition to financing your policy. Title companies can provide a wide variety of services in real estate transactions.
American Guardian Title is a trusted insurance provider and real estate transaction advisor. They provide affordable, comprehensive policies that protect your financial interests when purchasing real estate.