Selling Your First House? -- Here's the Scoop! (Part 3 - Title Insurance) -- So what is Title Insurance, why do you need it and how expensive is it?
The most important thing to know is that it protects your family, the buyer and the lender against any possible future questions over legal ownership of the property. Prior to all closings in Indiana, a title company will complete a title search to see if there are any known defects or liens against the title -- in other words, does the person selling the home really own the property and has anyone filed a lien against it for unpaid debt? (Like the county for unpaid taxes or a contractor who performed work on the property, but was never paid) If something arises from that search, it will need to be remedied prior to closing, but what if something surfaces after closing? Chicago Title, explains it this way:
How can there be title defect if the title has been searched and a loan policy issued?
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.
What title insurance protects against.
Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:
- False impersonation of the true owner of the property
- Forged deeds, releases or wills
- Undisclosed or missing heirs
- Instruments executed under invalid or expired power of attorney
- Mistakes in recording legal documents
- Misinterpretations of wills
- Deeds by persons of unsound mind
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes
If the property is being purchased using a mortgage loan, there will be two simultaneous policiies. The seller normally purchases a policy to protect the buyer, while the buyer purchases an additional policy to cover their lender. The rates are based on the sales price. In Indianapolis and surrounding areas, a policy purchased by the seller for the buyer might range from as little as $600 for a $100,000 property to $1,070 for a $500,000 sale. This should be part of the Estimated Net Proceeds document that any good agent will complete for you when listing your home.
For more information on Title Insurance, visit Chicago Title's website.
Other blogs in this series: