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Owner’s title insurance protects your biggest investment: your home.
When purchasing a property, the deed shows that the seller transferred their legal ownership, or title, to you.
Title insurance protects you if someone later says they have a claim against the property from before you acquired it. Typically, claims stem from a previous owner’s failure to pay taxes or from contractors who say they were not paid for work performed on the home before you purchased it. The owner’s title insurance policy is a one-time cost for protection against financial loss related to future problems with the title. These are typically issues that you would have no way of knowing about and were not responsible for causing but could cost you a lot of money down the road.
Here are six important facts to know about owner’s title insurance and why it offers exceptional peace of mind.
1. You gain protection from potentially serious ownership issues.
When you buy a house, you take on some risks. Owner’s title insurance defends you against any problems related to the deed or property ownership that might arise after your purchase. Some of these issues include:
- Incorrectly filed deed: If a mistake is made on the deed, such as it is not recorded in your legal name, ownership of the property could be unclear.
- Falsified information on the deed: Examples include a forged signature or altered details about the property.
- Mortgage fraud: A past owner could have made it look like a mortgage was paid when it wasn’t, leading the previous lender to foreclose.
- Liens: These are statements of debt filed against the property. They could be from a homeowner’s association, a contractor who wasn’t paid for work completed, or the government for unpaid property taxes.
- Missing heirs and conflicting wills: These after-death situations can cause significant confusion over who is the rightful heir and owner of a piece of property.
- Encroachments: If the property line isn’t clear and a neighbor builds a fence or physical structure that extends onto your land, it may impact your property rights.
- Easements: Someone else may have rights to a part of your property, such as a utility company, that may not be discovered during the buying process.
2. Lender’s title insurance and owner’s title insurance are not the same.
When you get a mortgage, your lender will require to you purchase a lender’s title insurance policy. This protects the amount they lent if ownership of the property is ever contested. If someone else claims ownership of the property and it’s legally upheld, a lender’s title insurance policy pays the lender the outstanding amount they’re owed. But that insurance doesn’t protect you or your investment. If a claim to ownership comes up, you’ll have to pay for legal proceedings. You may also lose the money you’ve spent on your down payment and subsequent mortgage payments. That’s why a separate owner’s title insurance policy, although not mandatory, is a wise purchase.
3. A title search alone is not enough.
The title insurance company or your attorney will perform a title search before issuing the policy. This involves extensive research of public records concerning the property, such as past deeds, wills, divorce decrees, tax records, etc. The process results in a preliminary title report and provides an opportunity to eliminate issues before proceeding with the sale. But even the best title search can’t foresee when a long-lost heir will show up to lay claim to the property or other similar scenarios. And that’s where title insurance steps in to protect you.
4. The risks associated with title issues are very real.
Although real estate comprises our nation’s largest market sector, the purchase and sale of real property still come with their share of risk. In fact, the American Land Title Association reports that nearly 40% of all real estate transactions include a defect in the title.
5. It’s a small price to pay for the protection it delivers.
The owner’s policy typically costs one-half to one percent of the total purchase price of the property and is a one-time cost, paid at the time of closing. It is good for the entire time that you and your heirs own the property. The cost of title insurance is quite low in comparison to the protection and peace of mind it provides.
6. Owner’s title insurance becomes more valuable the longer you have your home.
As you continue to pay your mortgage, you own a greater percentage of the property and have more to lose. A title claim can come up at any time, even decades in the future. An owner’s title insurance policy is especially important if you plan to stay in your new residence for many years.
When purchasing a property, the owner’s title insurance policy is an indispensable financial safeguard. It offers peace of mind by alleviating worries about having to fight expensive and stressful title claims.
For more information about owner’s title insurance and how it can protect your valuable real estate investment, please contact our helpful team of professionals.
About Certified Title Corporation: Since 1994, attorney-owned Certified Title Corporation has been furnishing residential and commercial real estate stakeholders across the nation with robust title insurance, settlement, and escrow services. Renowned for industry-leading reliability and an exemplary level of service and quality, the Maryland-based company helps clients from all walks of life achieve their asset goals. To learn more, call (888) 486-5511 or visit https://www.certifiedtitlecorp.com/.
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