What Is Title Insurance And Do I Need It?

Real Estate Agent with Barnes McQuade Realty

When buying a home there are many things you are going to hear and not understand...that is why you not only have a Realtor to help you buy or sell, but you also have other professionals at your service including home inspectors, pest inspectors, Real Estate Attorneys and many more.  Title insurance is one of those things you will see on a good faith estimate and ask what is it and do I need it to purchase a home.

The answer is yes and no (sometimes you don't have to have it) but ALWAYS recommended.  If you are financing your home, your lender will require you to obtain a title insurance policy.  In NC the closing attorney usually orders the policy.  If you are paying cash you may not be required to buy it, but it is strongly recommended and here is why:

Title insurance is a policy protecting the borrower or lender or both from loss or damage caused by a defective title to real property.  It is different than most insurance in many ways, but the two most obvious are: 1) it is paid for by a one time fee at closing (typically $2 per thousand and varies per appraised value of property)  2) it covers not what may happen in the future, but what may have happened in the past.  The way I usually explain this to my clients is just to picture you enjoying your brand new home and come to find out that many many years ago the farmer who owned the whole parcel your subdivision is on....never actually sold the property free and clear (for whatever reason).  Somehow the title is not clear; called cloud on the title and you may not actually own the home.  That is when your title insurance would kick in to protect you.  That may not be the best example, but you get the idea.  For more information on Real Estate please visit us here.  Hope this helps.  

Comments (1)

Jonathan Goad

Great example of why you need title insurance.  I wonder how often claims are made against the title of a property.  My guess would be 1 in 100,000 or 1 in 500,000.  

Jan 13, 2009 06:06 AM