Are you trying to determine, “who does title insurance protect?” It may seem like an unnecessary luxury, but title insurance can ultimately shield you from multiple issues in the long run. This is essentially a kind of indemnity insurance that prevents a holder from financial loss that results from liens, encumbrances or defects in a property’s title (i.e. a deed or other legal document that certifies home ownership). Both lender’s and borrower’s title insurance policies exist, and they can come with varying levels of coverage. These are both one-time, upfront costs rather than monthly premiums.
Here is an analysis of what title insurance protects.
Hidden Problems In a Title Search
A clean and clear title is essential to a transfer-of-ownership process in real estate. In order to ensure this is obtained, most title companies will perform a thorough title search, which involves carefully scrutinizing public records to confirm a person legally owns a property. A title search is also generally conducted to investigate whether there are any claims on the home, like back taxes unpaid by the previous owner. Unresolved building code violations and surveys with errors are just two types of issues that need to be fixed in order for a title to be considered “clean.”
Owner’s & Lender’s Policy
A basic owner’s title insurance policy will generally cover issues such as:
- Ownership by another party
- Forged signatures on documents and other forms of fraud
- Flawed records or record-keeping
- Encumbrances or judgements against a home, including outstanding lawsuits
- Restrictive covenants, including unrecorded easements.
Meanwhile, lender’s title insurance protects the bank or other lending institution used to purchase a home. This does not protect your investment (equity) in the home. It only covers claims affecting the lender’s loan. TheReal Estate Settlement Procedures Act (RESPA)forbids sellers from requiring purchase from a specific title insurance company as a way of stopping abuse.
Risks of Not Having Title Insurance
One of the most common risks of not purchasing title insurance relates to back taxes owed by the previous homeowner. Without this type of insurance, the new owner becomes responsible for these payments.
In the event a borrower defaults on mortgage payments, should there be any problems with a property title, a lending institution would be covered up to the amount of the loan.
The Cost of Title Insurance
The cost of title insurance varies by state. Receive a Re. Issue Rate (saving 30%) but the existing policy of the seller must be available and must meet certain requirements.
Contact Mathis Title Company for More Information
Want to learn more about, “who does title insurance protect?” Speak to the experienced professionals at Mathis Title Company in Fairfax, Virginia, to learn more about the importance of title insurance, as well as its costs and benefits. Call (703) 214-4020 or contact us online.
Mathis Title serves all areas in Northern Virginia, including Fairfax, Alexandria, Arlington, Centreville, and McLean and most areas in Virginia. Robin Mathis is an attorney who was sworn into the U.S. Supreme Court and who boasts 35 years of experience with real estate transactions and settlements, both residential and commercial. She is highly knowledgeable about both the buyer and seller sides of transactions. Ann Andreatos is a title agent with more than 16 years of experience in the title and closing industry. She and Bronwyn Chace, our other licensed title agent, will work tirelessly to ensure you have a clean title.