Why is Title Insurance Necessary for your Home Purchase?
Home buyers often ask what the significance is of title insurance in the buying process. You have so many expenses that are coming out of your pocket right now. Is this one that is particularly worthwhile?
Unlike home owners' insurance which is to cover any problems that may arise in the future - title insurance is there to cover something that may have already occurred.
According to the American Land Title Association (ALTA), about 25 percent of all residential real estate transactions have issues with the title. Most are resolved prior to closing; however, some claims and challenges can crop up after you have become the new owner.
Some of these include:
- Forgery and impersonation
- Lack of competency, capacity or legal authority of a part
- Improper recording of deeds
- Sudden appearance of someone claiming to have a prior interest in the property
- Mechanic's liens
- Undisclosed prior mortgage or lien
- Encumbrances or judgments
- Erroneous or inadequate legal descriptions
These are situations you may discover after your closing and they could derail your ownership or cost you in legal fees to battle it out in court.
There are two types of title insurance policies that you will be offered at your closing:
- The Lenders' Policy protects the bank against possible title problems and you will be required to purchase this policy if you are financing your home. It does not, however, protect your interests.
- For your protection you will need to buy an Owner's Policy.
The price of title insurance varies and correlates with your property's value. Once it is paid you never have to buy it again.
When you compare the cost of this protection against the possible hassle and losses you could face without it - the one-time charge is actually a bargain.
Copyright 2010 "Why is Title Insurance Necessary for your Home Purchase? "
Claudette Millette, Broker, Owner, The Buyers' Counsel - (508) 881-6230