Title insurance is a type of indemnity insurance that helps protect home buyers and lenders from financial loss caused by defects in a property title. The most common type of title insurance is known as lender’s title insurance and involves the purchase of a policy by the borrower to protect the lender.
When it comes to a condominium, an owner does not technically own the “land” but rather the unit itself. This can create some confusion as to whether or not the unit owner needs to acquire a title insurance policy.
The Basics Of Title Insurance
Having a clear title is essential for all real estate transactions. It is the responsibility of the title company to perform a search on every title to identify possible liens or claims before a title can be issued.
Title searches involve the examination of public records to confirm the legal ownership of a property and detect possible claims that could interfere with the home buying or selling process.
There are various problems that could arise and negatively impact a title, such as unresolved building code violations or erroneous surveys.
A title insurance policy helps protect against damage or loss as a result of liens, defects or encumbrances. Some of the most common claims that are filed against a title include liens, back taxes and conflicting wills. Basic title insurance policies help cover a range of hazards, such as ownership by another party, flawed records, incorrect signatures on documents, restricted covenants, and judgments or encumbrances against the property.
Lack of title insurance exposes the transacting parties to significant risk in the event that a title defect is in fact present but unknown. When title defects are found later on after the closing of a property, the financial burden of any claims may be placed on the buyer who would need to pay the outstanding debt or risk losing the home.
Purchasing title insurance is a fairly simple process. Typically, a closing or escrow agent will initiate the insurance process when the property purchase agreement has been completed. The parties then purchase title insurance at closing for a one-time fee.
Title Insurance And Condos
While lender’s title insurance is required, owner’s title insurance is optional. However, acquiring a policy is recommended to protect against issues like boundary disputes, building code violations by a previous owner, claims related to a forged power of attorney, improperly recorded documents, a former owner’s unpaid child support, conflicting wills, errors on the property deed, property survey errors, and liens from taxing entities, contractors or previous lenders.
When purchasing a home with financial help from a bank, a mortgage lender may require a borrower to purchase title insurance. Lenders frequently request borrowers to buy a title insurance policy to prevent any legal or financial claims from developing after the sale has been finalized. Although buying a condo differs from buying a regular home, the financial commitment is essentially the same.
Some people wonder if they need title insurance for a condo if they are paying all cash and do not require a mortgage. While homeowners are not legally required to purchase owner’s title insurance, it is highly recommended. Even if a condo is paid in cash, a homeowner is still at risk for open permits, outstanding liens and other issues that could arise after closing. Title claims are fairly rare but can happen to anyone.
Cost Of Owner’s Title Insurance
Cost is a major concern when purchasing any type of insurance. While most homeowners understand the importance of a standard homeowner’s policy, many overlook the importance of title insurance when buying a home. The average cost of a title insurance policy is about $1,000. However, this amount can vary based on location and the price of the home.
Title insurance policies are generally based on the total amount of the mortgage loan or the cost of the property. Homebuyers can learn more about the pricing regulations in their state through their state’s Department of Insurance.
Unlike other types of insurance, title insurance policies are paid with a single premium during the closing of a mortgage. If a person is refinancing or buying a real estate resale, they may be eligible for a “reissue rate,” which could result in a significant discount on their regular premiums.
Speak With An Experienced Title Company
When buying a condo, it is not always clear whether title insurance is required or a necessary purchase. In the majority of cases, acquiring owner’s title insurance is a smart investment as it can help protect buyers from the potential financial downfall that property ownership can sometimes create due to unexpected title issues. To learn more about whether owner’s title insurance is required for a condo or to speak with an experienced title company, reach out to the experts at Mathis Title Company today.