What is Title Insurance? Why Do You Need It?
When it comes to title insurance, many are puzzled. What is title insurance, and why do you need it?
Real estate transactions use a contract to convey a sale between two people. The only problem is, you need to have an accurate description of who the buyer and seller are, and if there are any underlying issues or changes to previous deeds that could cause the transfer of ownership to go wrong.
How does transferring a property deed work?
The transfer of a property deed is a legal transaction that must be recorded in public record to hold validity. In addition, the lender who is involved in the mortgage for the transaction will require an up-to-date legal description and “chain of title” (often provided by a title insurance agent) that shows the history of ownership/transfer to confirm evidence of the true owner of the property. There are other complications that arise that may restrict the use of the property or eligibility for sale, and these must be noted before eligibility for sale is confirmed.
What is title insurance?
The purpose of title insurance is to confirm the title search and review (survey the property and trace past owners/ownership issues) and to offer accurate coverage (protection against disputes or claims to property or property value) based on the history of the property or any encumbrances that may restrict title insurance coverage. This means, title insurance is meant to protect the home buyer and lender from claims to the title, thus grant full ownership of or right to the property.
Real estate transactions are nothing like regular transactions at a cash register. In order to assure that a desired home is even eligible for sale, you need a title insurance agent to confirm the history of the property matches what is stated in the contract. Not all home sales are honest, and a title search, review, and title commitment is evidence of a clean deal.
Why do you need title insurance?
What if your soon-to-be-neighbor built a fence that creeps into your yard? Or what if there are unpaid property taxes or a lien on the home? The purpose of title insurance is to sniff out all the issues that could affect a buyer’s full enjoyment of the property or a lender’s right to the total property value amount. This means any exceptions that are not covered under a standard title insurance policy will be addressed for review.
Things You Should Know About Title Insurance:
Not All Titles are “Clear”
Liens Could Affect Sale Eligibility
Property Restrictions Are Common
You Could Be Buying from a Fraud
Errors in Description Are Fatal Title Defects
New Owners Must Be Recorded on Public Record
It’s not uncommon for there to be exceptions to a title insurance policy. Understanding that not all titles are “clear” is the first step in getting a better grasp on the purpose of having a buyer and lender title insurance policy.
Work with Bay National Title Company to accomplish a better closing experience. Give us a call today to start taking advantage of Same Day Closing Disclosures.