If you’re like most people, whether this is your first home purchase or your fifth, you’ve heard of title insurance—but what is it, really, and how does it help you?
What is Title Insurance?
Title insurance protects your lender (and, if you have an owner’s policy, you) from problems that can pop up to challenge your ownership of a property.
Lenders require a title search, and they require buyers to purchase title insurance. It’s generally up to you whether you purchase an owner’s title insurance policy, but you do need to know that the policy the lender makes you buy is in place to protect the lender, not you.
First Things First: The Title Search
You’ll hire a title company to perform a title search. The person in charge of researching your soon-to-be home’s title will scour public records, searching for anything that could cause someone else to claim ownership to the property. He or she will also look for liens, clerical errors in documents, and fraudulent claims that have been made in the past.
Common Title Problems
No matter how “small” a title problem is, it needs to be resolved before you can take ownership of the property. Some of the most common title problems include:
o Mechanic’s liens, which are liens placed against a property by a contractor or another person who provides services to improve the property before work can begin.
o Errors in public records, which can occur at any point in time prior to the title search.
o Unknown liens of other types, typically for unpaid debts and taxes.
o Illegal deeds, which can happen when a minor, a person of “unsound mind,” or a married person posing as a single person receives the deed to a property.
o Missing heirs.
o Forgeries that another person has committed to claim ownership to the property.
o Undiscovered encumbrances, which occur when another person holds a claim to all or part of the property due to a previous mortgage or lien, or restrictions that limit the use of the property.
o Unknown easements that may affect your right to enjoy your property.
o Boundary or survey disputes that can occur between neighbors or other parties.
o Undiscovered wills.
Lender’s Title Insurance vs. Owner’s Title Insurance
Your lender will require you to pay for the lender’s title insurance premium, which only covers the lender from loss if an issue arises.
If you choose to buy a separate owner’s title insurance policy, you’ll be covered if something goes wrong with the title down the road—say, an undiscovered will pops up or a missing heir shows up on your doorstep. Although all title policies have variations, yours may cover legal fees to defend your right to ownership and reimburse you for your loss of investment if the title insurance company is unable to prove that it should be yours in court.
Can You Shop for Title Insurance?
You most likely won’t be able to shop for title insurance on your lender’s policy, but you can shop around for your own. You can ask your Lakewood Realtor® for recommendations to get started.
Are You Selling a Home in Lakewood or Long Beach?
If you’re selling a home in Lakewood or Long Beach, we can help. Call us at 562-882-1581 to find out how we’ll market your house to all the right buyers so you can sell it quickly and at the right price.
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