Every state has nuances concerning home ownership. In Texas you will want to investigate Title Insurance. When you purchase a home it is normal and customary to ask the seller to pay for a Title policy. The fee however, is negotiable between buyer and seller. If purchasing a builder home the builder will usually pay for the Title Policy if you use their lender and close at their preferred Title Company.
So why is Title insurance important? It's essential to make sure the home you are purchasing is free and clear of debts and leins.
Title Insurance is a contract of indemnity between the insured and a title company. The form of the contract is determined by the Texas Department of Insurance. Likewise, title insurance rates in Texas are promulgated by the Department and are uniform for all title companies. Everytime a home sells a Title Policy is written and provided to the buyer.
An explanation of title insurance is provided here by Austin Title.
Part 5: Texas Title Insurance
There are 2 major types of policy. The Owner’s Policy of Title Insurance is issued to an owner/purchaser and insures against certain listed title risks. The Mortgagee Policy of Title Insurance is issued to a lender and insures the validity of the lender’s lien against the property. Before issuing a title policy, a careful search is made of the county, state and federal records that affect real estate.
Some of the risks that exist which a title policy may protect against include: forgeries, false representations, mistakes at law, undisclosed heirs to name just a few. In most cases, it is customary in Texas the seller of the property pay for the Owner’s Policy, but is a matter of negotiation, and in many instances is paid for or partially paid for by the buyer. The premium for the Owner’s Policy is based on the sales price. The borrower is responsible for paying for a Mortgagee’s Policy, which is based on the amount of the loan.
The title insurance company also acts as an escrow agent between the seller, buyer and lender and has responsibilities to all parties for fair dealing. The title insurance company receives the buyer’s money as well as all other documentation required for the transaction. When all requirements of the contract and the lender are satisifed, the transaction is “closed”.
Title Policy Protections
- False representations
- Mistakes at law
- Undisclosed heirs
- Illegal trusts
- Delinquent taxes
- Lost wills
- Mistakes in legal description
- Clerical mistakes
- Defective acknowledgments on documents
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