Updated: May 21, 2020
Owning property means so much more than the money you spend on acquiring it. This is your investment, your equity. Owning that title adds value to your name and this extends to your family and your future. This is why so much work (and funds) goes into the buying process.
Wondering whether you should get title insurance? Let’s go over the facts.
What is title insurance?
Every time a transaction is made concerning the title, or right of ownership to a home, a public record is created. There will be a trail of any transfers of title, as well as transactions or events that affect such right of ownership. Title insurance protects the buyer and lender from any loss that comes from hidden defects in the system.
There are two kinds of title insurance.
Lenders title insurance is not optional, and is worked into the closing price of your home. It is a once-off cost and is calculated on the loan value. This ensures the lender and covers the amount you borrowed from them against any risk of (your) ownership. In other words, it proves that proper investigation was made into the title being free from any risk and is legally available for selling. It protects claims that affect their loan. They will not lose anything, nor be held liable for claims arising from your purchase. Although you are paying for this, it does not protect your equity - which is where Homeowner’s title insurance comes in. This also entails a once-off fee, worked into the closing price of your home. It is calculated at the purchase price and covers your equity and legal fees in the event of a claim against your ownership. This, unlike the lender’s insurance, is optional. And at this stage, you may be thinking a lot about savings and this may seem like a good option in cutting expenses. You may be asking yourself:
What could go wrong?
Since the entire buying process entails a thorough investigation into clearing the title for purchase, you could be lulled into thinking that Homeowner’s title insurance is overrated. Unfortunately, things DO happen. Consider the following possibilities, which are all covered by homeowners insurance:
Any discovery of a forged signature on the title deed
Discrepancies on a will, trust or title deed coming to light
Judgments or liens against the property, previously overlooked
A claim from an unknown heir, whether rightful or not, initiating legal action
A restriction or easement, previously unclaimed
Human error in any public records resulting in corrective action
A previous, long-disappeared, owner’s tax default needing settlement
Claims from contractors for not being paid for work done on the house
Even though a careful search is made into the public records by title experts and / or attorneys, this is not a guarantee against human error or fraudulent practices by others.
Should any of these situations arise, you are the one responsible for any claims that are made. This could mean that you stand to lose your property as well as the equity in that property. It definitely means a legal dispute and all the expense that accompanies it.
Money is one factor. The stress of a legal dispute and losing your home is another. Or don’t risk it. Get the insurance and be protected from the possible, hidden past of your investment. Feel free to discuss your options in-depth with our Haven Title brokers, and benefit from our rates and benefits offered exclusively to Oak Avenue clients.