Title
insurance basics
Title insurance is a form of insurance that is designed to
protect lenders and property owners from any potential hidden
claims against a property. If, for example, you purchase a home
and later someone contends the sale was invalid, title insurance
protects against any possible resulting losses.
Two main types
There are two main types of title insurance. The first is the
type that lenders require you to take out when you apply for a
mortgage to protect themselves against any potential loss on the
loan amount as a result of title issues. This insurance expires
when the loan is paid off. The second is personal title
insurance that is designed to protect you, the buyer, against
any such losses. While optional, it is advisable as it protects
your own investment interest. Personal title insurance remains
in place the entire time you own a property.
Why it’s important
Whenever property is bought or sold a title search is conducted
to ensure that the person making the sale is the legal owner.
Occasionally, however, oversights can occur. Perhaps the owner
has unpaid property taxes and the local county has put a lien on
the property. Or maybe the property is co-owned by a seller’s
ex-spouse and he or she neglects to have this person sign the
deed transferring the title. In cases such as these, if a
dispute occurs because a title search was faulty, title
insurance covers the cost of settlement and any ensuing legal
fees.
Cost involved
The cost of title insurance varies greatly depending upon where
a property is located, its price and the extent of coverage. In
some states, it may pay to shop around as title insurance
premiums may vary between insurance companies. In others,
however, rates are established by the state and may not be
negotiable. The good news is that, unlike regular home insurance
where you are charged an annual premium, you have to pay for it
only once, at the time of closing. (The exception is if you
refinance your mortgage. You will need to pay again for a new
title insurance policy, although you may qualify for a cheaper
“reissue rate.?
Who pays?
Who pays for title insurance is open to negotiation. In a strong
seller’s market, you can make your offer more desirable by
offering to cover the cost. Conversely, in a strong buyer’s
market, a seller may offer to pay for title insurance to sweeten
the deal.
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