When purchasing a home, most buyers focus on securing a mortgage, arranging inspections and preparing for moving day. Although it is a less obvious part of the process, it is also important to remember to address title insurance.
Title insurance is a policy that protects homebuyers and lenders from financial losses related to defects or issues with the title of a property. While it may not seem as tangible as a new roof or updated kitchen, title insurance can provide important protection for one of the most significant investments you’ll ever make.
Safeguards leading to greater peace of mind
Title insurance is designed to shield against problems that may not be immediately apparent during the home-buying process. A title represents the legal ownership of a property. Before a home is sold, a title search is typically conducted to ensure that a seller has the legal right to transfer ownership and that there are no liens, claims or disputes attached to the property at issue.
With that said, despite a thorough title search, some issues can remain hidden—such as clerical errors, undisclosed heirs, fraud or previously unknown easements. Title insurance covers these hidden risks and helps a policyholder to avoid costly legal and financial consequences.
There are two main types of title insurance policies: one for the lender and one for the homebuyer. Lender’s title insurance is usually required by the mortgage company and protects the lender’s financial interest in the property. Owner’s title insurance, on the other hand, protects the buyer. This policy ensures that if someone later claims a right to the property or if an error surfaces—such as a previously unpaid tax or an unresolved lien—the title insurance company will cover the legal fees and related costs to resolve the issue.
For buyers, title insurance generally offers greater peace of mind. Purchasing a home is a significant financial commitment, and the last thing a new homeowner wants is to face a lawsuit or claim of ownership after closing. With title insurance, homeowners have a safety net that can help prevent or resolve these types of disputes without incurring out-of-pocket expenses.
Additionally, having a real estate attorney involved in the process of securing title insurance can provide added protection and insight. Real estate attorneys can review title reports, explain legal terms and identify potential red flags that could affect ownership. They can also negotiate terms and ensure that a title insurance policy adequately covers a buyer’s interests. In the event of a title dispute, an attorney can represent the buyer’s legal interests and work to resolve the issue swiftly and efficiently.