Buying a home is one of the most emotional and confusing
transactions you may face in your lifetime. As a settlement officer,
I am asked to explain many things, but most of all I get questions
on title insurance. “Why do I need title insurance? What is
it for? Why do I have to pay for lender’s and owner’s
title insurance? Shouldn’t
one policy be enough?”
Here’s The Answer
Your title refers to your legal right to possess
and use real property. Title insurance exists to protect the lender
and the buyer from hazards on the title, which might affect your
right to the property.
What are Title Hazards?
Title hazards are generally referred to as
defects. There are probably 200 or more defects to real property
that can’t be discovered even with the most detailed title
search. These defects or mistakes began from the time the original
land that your home sits on was first recorded. Even if you have
a new home, the land has been passed from owner to owner. Hazards
can include:
- Mistakes in recording deeds
- Misfiled records
- Fraud
- Forgery
- Deeds by unsound mind
- Inheritance problems
- Creditor issues
This is only a short list of potential title problems. Many more
exist and do pop up on occasion.
Why
do I need Lender’s Title Insurance?
You may wonder why you’re not protected if the lender has title
insurance and you didn’t purchase the owner’s policy.
The lender made a huge investment on your part in return for your
promise to repay the debt. Because their risk is generally larger
than yours, financially speaking, they need to be protected from
any title failure. The deed alone is not enough. In fact, the deed
does not prove you own the property completely and totally. The seller
of the property may have had their rights circumvented by an unscrupulous
person who committed fraud or forgery. So, the title insurance covers
the lender’s investment should any litigation ever occur.
On
the other hand, the owner’s insurance is generally a sound
investment to protect you. Should litigation ever occur on a title
defect, you would be covered by the insurance policy you purchased.
For instance, let’s say your fence was incorrectly placed on
your neighbor’s land. If the fence is on their property, then
they could sue you for removal or take possession of the fence even
though the seller thought the fence was placed on the land they sold
to you. This is just a small example of why title insurance is important
for your rights and security to your property.
The last thing you
want or need to find out is that you made hundreds of payments on
a home which has title defects and may not legally be your property.
At Beltway Title, we now offer the most comprehensive
title insurance policy in the industry today, a policy that protects
the owner from not only pre-policy situations but now you, the owner
are protected in the event of many post-policy problems such as encroachments
and forgery. Many other improvements also make this policy the policy
of choice.
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