What is title insurance?
Title insurance is a type of indemnity insurance that provides coverage against a loss resulting from encumbrances, liens, or defects in title. In essence, it protects the homeowner from claims of ownership made by third parties that pre-date the transfer of title to the homeowner. Though a lender will require a homeowner to purchase a lender's title insurance policy (which only protects the lender), owner's title insurance is optional. It is a one-time fee paid at closing that protects the homeowner for life.
Why do you need it?
When you begin the process of closing on a new home, the title company will perform a title search in the county land records which will reveal any title defects on the property. The title company will then work to remedy any defects prior to closing. But there are some title defects that are not discoverable through a proper title search. Here are just a few examples:
Recording Errors: A previous deed was recorded in the wrong county, so it was not revealed in the title search.
Mechanic's Liens: A contractor performed work on the property in order for the seller to market the property for settlement and was never paid. The contractor put a "Mechanic's Lien" on the property after it was purchased.
Defects not revealed on an accurate survey: The homeowner's neighbor alleged "adverse possession" of a portion of the homeowner's property, which was not revealed on a survey the homeowner purchased.
Invalid Transfers of Ownership: The property was purchased at a foreclosure auction. After closing, the previous owner who was foreclosed upon challenged the validity of the foreclosure and claimed ownership of the property.
The Case of the Unknown Heir: Property was bought from an estate, and an "unknown heir' later asserts rightful ownership to a portion of the property.
Identity Theft: After settlement, a person commits identity theft and fraudulently takes out a home equity line of credit ("HELOC") in the homeowner's name.
And there are many more examples of costly title defects that could be avoided through the purchase of an owner's title insurance policy at closing. As an expert in title insurance, we can guide you through this decision process, along with any other questions regarding the settlement experience. Call Baer Law Partners today at 518-577-2290 discuss your questions!
Comments