Know The Facts About Title Insurance
Finding the home of your dreams for a price you can afford is one of the best feelings there is. Unfortunately, before the seller can hand over the deed to the property and you can start moving in, there are some clerical concerns that need to be addressed in order for your loan to go through. One such concern is title insurance, a service that costs both time and money, but could save you from becoming involved in a costly legal dispute
or a fraudulent transaction.
Title insurance is a service that researches the owners right to sell the property, among other things
. Anything from a divorce dispute to any liens on the property will show up on the report. Lenders require it before you sign the paperwork for a mortgage, mostly because problems with a title occur often. Jeremy Yohe, spokesman for the American Land Title Association, asserts that, one out of every three searches reveals a title or public record defect that's fixed before the transaction closes. But, before you start getting out your wallet to pay this latest fee, it is important to learn more about it. Here are four facts of title insurance, which will help you understand it more.
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1. Basic Title Insurance Doesnt Protect You
The basic title insurance that your lender will make you buy is not designed to protect your interests
; it is designed to protect your lenders. So, if you need to defend your right to ownership in court, you most likely wont have the ability to do so, if you only purchased basic title insurance.
However, you can purchase additional title insurance, which will protect you from any financial disputes that might occur before, during, or after the home buying process. That way, you are truly protected from incident.
2. You Can Negotiate Who Pays
Depending on where you live, the obligation on who pays the title insurance changes. Sometimes, the seller pays the lenders title insurance fees. Other times, the buyer does. Either which way, the payment can always be negotiated. For example, a seller might offer to pay both the lenders and the buyers title insurance in exchange for a higher sales price. So, feel free to use this as a bargaining chip when you are negotiating the price of the home
3. You Can Get Basic Buyers Coverage Or Something More Advanced
Just like many other types of insurance, there is more than one level of title insurance coverage
. You can get just the lenders coverage, you can add on the basic buyers coverage, or you can upgrade even more to something that protects almost every nook and cranny. The basic buyers plans usually cover:
- Forgery and impersonation
- Deed not signed over by a necessary party (spouse, co-owner, heir, etc.)
- Undisclosed (but recorded) mortgage, lien, or use restriction
- Undisclosed heirs
- Lack of a right of access
- Not properly recorded deed
- Lack of legal authority by a party
- Erroneous/inadequate legal descriptions
An extended policy covers the above, plus:
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- Off-the-record matters like adverse possession or prescriptive easement
- Incorrect survey
- Preexisting violations of subdivision or zoning laws
- Off-record liens
- Deed to the land with buildings encroaching on another
4. You Can Go With Any Title Company
The seller, your realtor, your lender, or even a family member might suggest a title company to go with. That does not mean that you have to use that title company. Research your title company and make sure that it is stable and reliable
. If an issue comes up five or ten years down the road, you want your company to still be there and insure you in a legal battle.
That being said, you might want to go with the company your lender suggests
. Your lender is not looking to swindle you out of good title insurance. Since you (or the seller, depending on the law in your state) are paying for their title insurance, they want to be just as protected as you are. Your home is their investment as well, so giving you bad advice for where to get title insurance might just cause them more hassle farther down the line.
Because your home is such a large investment, getting title insurance not only for your lender, but also for yourself, is advisable. Not purchasing title insurance for yourself could lead to problems farther down the line.