What is Title Insurance and Why Do I Need it?

Buying a home is an emotional and financially significant event for most people but when you purchase your home, how can you be sure that the seller really owns the property? How do you know if the work done on the house was paid for? These types of past events are the focus of title insurance. Whereas, homeowner’s insurance focuses on covered future events for as long as you continue to make the yearly premium payment, title insurance is more concerned with unknown past events for a one-time charge. When purchasing real estate, you are purchasing the title to the property. Your title may be limited by rights and claims asserted by others, which may limit your use and enjoyment of the property and even lead to financial loss. Title insurance protects against these types of title hazards. Another important distinction of title insurance is its emphasis on risk elimination before insuring. It begins with a thorough search of public land records affecting the real estate concerned. More than 1/3 of all title searches reveal a title problem that title professionals fix before closing.

What are Some Things Title Insurance can Protect me From?

Common title hazards and concerns include:

  • Errors—Incorrect information in deeds, mortgages, public records, etc., such as wrong names or errors in the legal description.
  • Liens—Claims against the property or the seller which become the new owner’s responsibility after the sale. Examples are unpaid mortgages, taxes, bills owed to contractors, unpaid homeowner’s association dues or other creditors, etc.
  • Claims of Ownership—For instance, a claim of “marital interest” by the spouse of a former owner or by a child of a former owner who was not mentioned in his or her parent’s will.
  • Invalid Deeds—Transfer by a previous seller who did not actually own the property, or by a previous owner who was not mentally competent.

How it Protects

Say, for example, you recently purchased a new home from a builder, but the builder failed to pay the roofer. Wanting to be paid, the roofer filed a lien against the property 3 days after you closed on your new home (contractors have 90 days to file a lien on a property once work is complete, if they have not been paid). Without owner’s title insurance, you would be responsible for paying this existing debt. This is just one example of how title insurance protects homebuyers from various significant risks.

Locally, a homeowner who purchased a newly constructed condominium in 2006 directly from the builder entered into a purchase contract with a buyer in 2018. The builder/developer never recorded the deed in 2006, transferring ownership to the new owner. When a title search was requested by the seller for this new purchase contract, it revealed that he had not been shown as the owner on public records for the last 12 years, rather it was still deeded to the builder/developer. The builder/developer was contacted and was not willing to have a new deed recorded correcting the error. The seller was able to use his owner’s title insurance policy and file a claim with the title underwriter. The title underwriter jumped in and brought a Quiet Title action suit before the court and was awarded the deed transfer and clear title, without holding up the closing. Had the seller not had title insurance, it would have cost him months of valuable time and thousands of dollars to retain an attorney to correct this title defect.

The bottom-line, as long as you or your heirs own your home, owner’s title insurance protects your property rights by providing peace of mind to what is likely one of your most significant assets. If you have questions about protecting your next home purchase feel free to contact us at info@capitaltitle.net or call 800.851.8329.

Check out the full article here, on page 6 of the Birmingham Burb https://www.thejeffaresgroup.com/birmingham-burb-qrtly

Lisa R, Capital Title

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