The Role of Title Insurance in Real Estate Transactions
Real estate title insurance is a vital component in the process of buying a home. Everyone knows that the purchase of a home is one of the best investments you can ever make, but title insurance matters aren’t quite as ingrained in people’s minds. If you aren’t protected, the investment that you’re hoping to gain to secure your financial future could turn into a complex problem that drains much-needed assets.
Even if the deed on a home is valid and meets the necessary recording requirements — it doesn’t mean that you are “home free.”
The Basics of Title Insurance
Real estate title insurance can be purchased by home buyers and lenders alike. The fundamental purpose is to protect the parties in the sale of a house from financial loss related to any problems with a particular title to a piece of real estate. There are a number of issues that can come up as it relates to this type of transaction. These can include:
- Presence of unpaid liens or mortgages — which can be seized by creditors in a foreclosure
- Illegitimate ownership — where the seller/transferor isn’t the actual owner
- Partial ownership by another party — when a family member/other owner has rights to home
- Problems with taxes — unpaid tax liens or other tax-related issues susceptible to foreclosure
- Title chain issues — gaps in conveying the title (example: deceased relative not entered in probate)
What title insurance does is act as a legal protection in the case of a lawsuit being filed by another potential owner or interested party. The title insurance company would represent you in court. If the lawsuit is lost, the company would “foot the bill” for any financial judgments assigned to you — relieving you of any responsibility for the issue with the title (unpaid mortgages, ownership, taxes).
To break it all down to the basics, real estate title insurance is about protecting you from defects: another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the insurance policy.
For Now and For the Future
For financial reasons, as well as for peace of mind, title insurance is necessary because it affects the value of the property. Not only does it protect you by insuring a quality transfer of ownership,but it will also insure the value the property has in the marketplace.
If down the line you are ready to move and sell the home, the title needs to be clear. If the title to your real estate hasn’t been insured, it can’t be sold for its full value in the marketplace. The potential profit someone can make may be significantly reduced because the home is devalued. Getting real estate title insurance not only affects you and your family in the short term against defects, but it also brings security in property valuation when you are ready to sell.
Guidelines for Title Insurance
The title insurance company abides by underwriting guidelines to prepare a policy. From Florida and across the United States, these guidelines may differ. It is important to have a reputable title insurance company and underwriters to address the needs of a wide variety of clients and closings.
Since the title to your home needs to be insurable, the language in the policy is critical similar to the legal requirements of state law. The quality of the title insurance company you choose matters
The Process and Types of Title Insurance
You should contact a title insurance company as soon as possible in the process because they need enough time to research the title for all potential problems. The process must be completed prior to issuance of the policy. The last thing a new homeowner wants is for complications to come up on closing day.
First, the research is completed on all prior conveyances of the property, including the legal definitions within the documentation. After verifying the chain of title, the company representative(s) will investigate the property for any of the defects listed above. Liens or any other evidence of recorded encumbrances on the real estate can come to light during this part of the process.
Once all the research is completed, the policy can be written and approved. The two primary types of real estate title insurance policies are:
- Owner’s Policy — insuring that the title is free from encumbrances or liens and that the new owner has the title to the property
- Lender’s Policy — insuring that the lender’s collateral in the property is protected against any title issuesLender’s Policy — insuring that the lender’s collateral in the property is protected against any title issues
A Better Closing Experience
The role and the impact of title insurance in real estate transactions cannot be underestimated. Accuracy and security in the purchase of a home bring unmitigated value to this demanding process. But it doesn’t have to be complicated.
Bay National Title Company has a meticulous team you can count on for unsurpassed customer care and a renowned blend of exceptional service and dedication to each client. As the real estate market is always changing, it is necessary to have solid, experienced professionals on your team to ensure a closing experience that is personalized and exceptional.
Adhering to the highest standards, BNTC is a member of various associations like the American Land Title Association (ALTA) and the Florida Land Title Association and has received numerous Top Agent Awards for customer satisfaction and industry expertise.
For the latest information on real estate title insurance and other important issues related to the real estate industry, stay in touch with us here. We are dedicated to helping homeowners, lenders, and other industry professionals with the latest information affecting their lives and their financial future.
Don’t think you own. Be sure. For more information on title insurance or our full array of services, contact BNTC today. We serve the people of Florida, as well as across the US. At Bay National Title Company we bring you peace of mind and a better closing experience.