Title Insurance & Real Estate Deals

Contrary to popular belief you must always elect title insurance on all your transactions whether you’re buying or selling!

First, let us explore why you should buy title insurance as a buyer. When you borrow money from a lender to buy a new home you will be required to pay for title insurance. This title insurance is for the lender and covers them only. You will be given the option to purchase your own title insurance at the closing. Typically the cost is two or three hundred dollars. This insurance, should you decide to buy it, will protect you from any defects in the title. Before the closing the attorney will order a title search which looks for liens against the home and to make sure the property has a clear title.

The purpose of title insurance is to protect you against any unforeseen problems or claims against the property. You will be charged a one time fee for this protection. If you don't buy title insurance and your attorney did not do a good job with the title search you could be held liable for existing liens against the home. You could owe someone thousands of dollars for work done on the house before you bought the home or because there is another property owner that you did not know about.

The bottom line is for only a couple hundred dollars you can protect you from the unexpected title problems and gain a little piece of mind.

Now let’s explore why buying title insurance as a seller is equally important.
Any prospective buyer will need evidence that his investment in your property is free of title defects. In fact, your contract of sale probably requires it. The title insurance policy that you provide the buyer is a guarantee that you are selling a clear title to your real estate, unencumbered by any legal attachments that might limit or jeopardize ownership. It reassures your buyer that the title has passed the most careful scrutiny. In addition, it can help your deal close more quickly and easily.

You may be asking yourself isn’t that what a title search is for, so why should I pay the expense of title insurance- it doesn’t make sense! I learned long ago a title search is only as good as the searcher…

I’ll give you an example: when I bought my first home it was a foreclosure through the RTC ( as you can tell this was many moons ago), and as is customary my attorney did a title search which came up crystal clear, When I put it on the market for sale 3 years later, the buyer did their own title search, but this time it came back with an IRS lien from a previous owner to the tune of $35K ! If I didn’t have title insurance I would have been on the hook for the 35K, even though it wasn’t mine! NOTE: Remember, liens are on properties, not on individuals.

Until next time, be well…

James Gage