Why Title Insurance is Necessary

Who needs title insurance? If you are buying real estate it is crucial to make sure you purchase title insurance. If you are obtaining financing through a lender, you won’t even have a choice on this. The lender will not give you a mortgage without title insurance. If purchasing without financing or if seller is holding the mortgage, you will be able to close without title insurance. I do not recommend that you do this. It is well worth the expense to obtain the protection title insurance provides.

What is it? When you buy title insurance, the title company searches all available public records to determine if there are any liens or judgments against the property. This is particularly important following difficult economic times because many sellers have used their real property as collateral against personal and business loans. If you buy property in a “short sale” situation, multiple liens are likely to exist on the property for property tax arrears, water and sewer bills, legal bills, environmental control board liens, etc.. Even contractors performing repairs on the property can file a lien against the home. Other items that will show up on the title search include easements on the property for utility access or other right of way over your property (maybe a neighbor’s right to access his rear yard through the driveway).

How to get it . If you are purchasing, your attorney will order the title search from a licensed title insurance company. These companies all perform the same type of services and the search fees and insurance rates for coverage are set by State Insurance Department. You will receive a good faith estimate from your lender as you start the loan process. On this document will be an itemization of the estimated title insurance charges which make up part of the overall closing costs.

What it doesn’t cover. It only covers real estate. It doesn’t cover appliances or the equipment in the home. Furthermore, although the title report will give details on the legal occupancy of the home and any existing violations, the title insurance company provides this “for informational purposes only”. Thus, your attorney must make sure any issues raised by these reports are addressed prior to the closing. Otherwise you will be left “holding the bag”.

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