Title insurance protects you from these very common homeowner nightmares
Purchasing a new home is a huge investment and the sheer volume of documents to sign at closing can be overwhelming and a little intimidating, right?
You wonder if you can cut a few corners, decline a coverage here or there. However, when it comes to title insurance, pay the one-time fee for coverage, and you won’t have to worry about potential homeowner nightmare scenarios, which have actually happened and caused a huge dent in some wallets.
Before we list the potential issues with a title, what exactly is title insurance?
A title professional will conduct a search of public records to find and resolve defects within a title from previous owners.
However, even the most experienced and eagle-eye title professional could potentially not see well-hidden problems, such as incorrect filings or fraudulent titles.
If a problem arises after you have purchased the home, your title insurance will protect you from potentially heavy costs otherwise incurred (by you!) without title insurance.
There are two types of title insurance coverage: a lender’s policy and an owner’s policy. If a problem arises, a lender’s policy protects the mortgage lender, and an owner’s policy protects, you, the new owner from liability.
A mortgage lender requires purchase of a lender’s policy, whereas, the owner’s policy is optional. Both coverages provide the maximum amount of protection for your home since they cover different issues.
Title insurance will provide protection from the following real title claim nightmares:
Intrusive Neighbors: A neighbor has installed, for example, a fence on your property and you need to reestablish the correct property line by taking the neighbor to court. With title insurance, attorney and court fees are covered.
Hidden Previous Owners: Long-lost relatives or a former spouse may try to claim ownership of your new home. Without title insurance, this issue can be extremely costly to you.
Unpaid Taxes/Liens/Judgements/Additional Unknown Mortgages: Yes, without coverage, you would be fully responsible for all unpaid fees. With title insurance, you would file a claim indicating that you were informed the title you received, indicated it was free and clear of any of these issues, and the outstanding fees would be covered.
Public record discrepancies: With a title search, discrepancies can be found and corrected. Without the title search, when you attempt to sell the home and now the discrepancies are found, you run the risk of having to sell the home for less than you paid for it.