What Is Title Insurance?

When buying a home, one of the most vital steps in securing ownership is obtaining the title. Obtain title refers to the buyer receiving ownership rights for the property from the seller. So, why would you need a title insurance policy? Keep reading to find out.

Why Do You Need Title Insurance?

Generally, title insurance is an insurance policy that protects homebuyers and lenders from a bad title. A bad title could mean there are outstanding liens, back taxes, and/or conflicting wills. Overall, a title insurance policy protects the buyers when the title to a property is invalid.

How Does Title Insurance Work?

There are two types of title insurance:

Owner’s title insurance

You are not required to purchase owner’s title insurance, but it is highly recommended. It can protect you from:

  • Conflicting ownership claims
  • Outstanding liens, lawsuits, and other encumbrances that invalidate the seller’s legal claim to the property
  • Flawed or fraudulent records
  • Undisclosed easements or other agreements that might limit the use or reduce the value of the property

Trust us; it’s wise to purchase owner’s title insurance. You don’t want to be stuck with extra fees, fines, and more leftover from the previous owner. Owner’s title insurance is a one-time fee that lasts as long as you own your home. So, we think it’s definitely worth it!

Lender’s title insurance

A lender will almost always require a borrower to purchase lender’s title insurance before receiving a home loan. The title company will typically issue the policy once they have concluded their title search.

Lender’s title insurance does everything that owner’s title insurance does, except it protects the lender against potential losses if the seller cannot legally transfer title rights. The policy will cover the lender up to the amount of the mortgage.

What Is Warranty of Title?

Warranty of title is an alternative to title insurance. It’s a guarantee by the seller that they have the legal right to transfer ownership to the buyer. If this turns out to be false (someone else also has a claim on the property), the warranty permits the buyer legal recourse against the seller.

Most transactions already include a warranty of title by default. However, it’s always vital to check.

How Much Does Title Insurance Cost?

It can cost anywhere between $500 and $3,500, depending on your geographic location and how clean the title is. If a title has too many defects, the title company may decline to offer a policy.

How Do I Get Title Insurance?

Many real estate companies will recommend a title company you can work with. However, you are always free to choose one of your own.

Typically, the process occurs in two steps:

  1. A title company performs a title search. This search ensures that the property you’re purchasing has a clear title, which means the seller owns the property and has the legal right to sell it.
  2. After the company finishes the search, it will assess any issues and potential previous undiscovered ones. They will base their quote on these issues.

Find Your New Home Today!

The Massey Team at Berkshire Hathaway HomeServices Select Properties will help ensure that you are well protected during and after the homebuying process. We want to make this process as straightforward and fun as possible. Buying a new home is an exciting time that shouldn’t be marred with the worry that back taxes or liens will rear their ugly heads.

If you’re in the market for a new home, you’ve come to the right place! Visit our website today to view our listings.

Do you want to get in contact with a team member? Give us a call at: (618) 791-5024 & (618) 791-9298.

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