When purchasing real estate, you acquire title to the property. This title includes your rights of ownership and possession of the land. Sometimes, however. your rights to the property can be limited due to claims asserted by others.
These potential claims, if not caught and corrected before you buy, can limit your title to the property, have a negative impact on the value of your home and threaten the interest that you and your mortgage lender hold in the property.
Acquiring Title Insurance
Title insurance is a welcome "security blanket"for home ownership because of the significant investment you make when buying a home. Purchased as a one-time expense, title insurance covers you against loss due to potential pre-existing liens and hazards that may not be uncovered in a general title search.
The Importance of a Title Search
Despite the expertise and dedication that go into a title search, hidden title defects can emerge after completion of a real estate transaction, leaving you without a clear title. Title defects can be an unpleasant and costly surprise. Some examples include:
- Previously undisclosed heirs with claims against the property
- A forged deed that doesn't transfer title to real estate
- Instruments executed under expired or fabricated power of attorney
- Mistakes made in public records
Title insurance is a simple step you can take to protect yourself against loss or damage due to potential problems with your title. Ask your real estate professional to learn more about this valuable service.
Researching a Title
A title insurance company will perform a title search before issuing an insurance policy. This labor-intensive process searches the history of public records for your property (It's not uncommon to find liens on properties that date back over 100 years!). The search results may uncover items that need to be corrected before a clear title can be conveyed, such as:
- Outstanding mortgages, judgments and tax liens
- Deeds, wills and trusts that contain improper vestings and incorrect names
- lncorrect names
- Incorrect notary acknowledgements
The buyer's title company will issue a preliminary report on The property. A preliminary report gives the buyer, seller and lender an opportunity to review any potential title defects that a re to be cured or shown on the title policy.
What Title Insurance Covers
There are different types of title insurance policies that can be purchased by the buyer, seller or by the leader. Title insurance is typically issued in the amount of the real estate purchase.
For an in-depth explanation of title insurance, and for assistance in choosing the policy that is right for you, please work with your real estate professional and your title representative.