Title insurance protects you against issues with a property’s legal history. When you go to buy a property, you are getting everything with it. This could mean that ownership disputes of the past, easements you didn’t know about, or other issues with the deed could affect you. Title insurance helps safeguard against many of these unknown risks. This gives you financial protection after such a big purchases, as well as needed peace of mind.
The real estate lawyers at Mark Harford Law can help you understand title insurance and its impact on a real estate transaction. We help Missouri residents and businesses with property transfers, purchases, and other real estate needs. Get in touch today to see how we can help.
Understanding Title Insurance
When purchasing real estate, most buyers focus on the property’s price, location, and financing. Yet one critical element often overlooked is the property’s legal history. Title insurance is designed to protect homeowners and lenders against potential issues with a property’s title. In simple terms, the “title” is the legal record of ownership. If that record is flawed, disputed, or incomplete, title insurance provides financial protection and peace of mind.
Title insurance is a unique type of coverage because it safeguards against past events rather than future risks. Unlike auto or health insurance, which protect against accidents or illnesses that may occur, title insurance addresses problems that already exist but may not be apparent during the purchase process.
Common Title Issues
Even with thorough due diligence, hidden problems can arise. Title insurance helps protect against issues such as:
- Unknown Liens: Previous owners may have unpaid debts, taxes, or contractor bills that result in liens against the property.
- Errors in Public Records: Clerical mistakes in deeds, surveys, or property descriptions can create legal disputes.
- Undisclosed Heirs: If a deceased owner’s heirs later claim rights to the property, ownership could be challenged.
- Fraud or Forgery: Fraudulent signatures or forged documents in the chain of title can invalidate ownership.
- Boundary Disputes: Conflicting surveys or unclear property lines may lead to costly litigation.
Without title insurance, these problems could result in significant financial loss or even loss of ownership.
Types of Title Insurance
There are two primary forms of title insurance:
- Owner’s Policy: Protects the buyer’s ownership rights. It covers legal fees and financial losses if a title defect arises after purchase.
- Lender’s Policy: Required by most mortgage lenders. It protects the lender’s interest in the property until the loan is repaid.
While the lender’s policy is mandatory in most transactions, the owner’s policy is optional. However, skipping owner’s coverage leaves buyers vulnerable to risks that could jeopardize their investment.
How Title Insurance Works
The process begins with a title search conducted by a title company or attorney. This search reviews public records to identify potential issues. If problems are found, they are typically resolved before closing. Title insurance then provides a safety net for defects that remain undiscovered or arise later.
If a claim occurs, the insurer will defend your ownership in court and cover financial losses up to the policy amount. This protection continues for as long as you own the property, offering lasting security.
Cost of Title Insurance
The cost varies by state, property value, and insurer, but it is generally a small percentage of the purchase price. Because it is a one-time expense paid at closing, many buyers find it a worthwhile investment. Compared to the potential cost of litigation or loss of property, the premium is minimal.
Use Title Insurance to Protect Yourself in a Real Estate Transaction
Title insurance is important to many real estate transactions. It is a worthwhile investment that gives you assurance that, should an unknown problem with the property’ title arise, you are covered. Not having it when you need it can be a major financial burden, not to mention the stress involved.
Let the dedicated real estate attorneys at Mark Harford Law help you with your transactions. Contact us today for a consultation.