- Marino & Marino, P.C.
HOW TITLE INSURANCE WORKS IN REAL ESTATE
When you’re buying a home, the topic of Title Insurance is sure to come up – but what is it, and how can it protect you as a new homeowner? Read on to learn the basics of Title Insurance.
Marino & Marino, P.C. Source: RisMedia
When buying a home, you might wonder what title insurance is and how it works. As with any insurance, it protects against loss, and this insurance relates to issues with the title of the home you are buying.
What is title insurance?
This insurance protects home buyers and mortgage lenders should there be a problem with the title that causes a financial loss. There are two types of insurance policies for the title; one is lenders’ title insurance which protects the lender through the buyer paying for it.
Owner’s title insurance offers protection for the buyer. It is an optional expense a buyer can pay for as part of their closing costs.
How does title insurance work?
Before a real estate sale closes, the property must have a clear title. Title companies run searches to find claims against the property.
Public records will be searched to confirm the seller’s ownership and uncover any claims on the home. As well as claims or liens on the property, building code violations, or other issues could stop the title from being clean.
Title insurance coverage can protect buyers and lenders should there be a defect in the title or disputes over the ownership.
Claims could be filed against the title for liens, back tax assessments, easements, lines of credit, or disputed wills. While insurance normally protects against things that could happen, title insurance deals with things that have happened in the past.
Insurance on the title covers buyers and lenders for the following issues:
Ownership claims from another party
Errors in the records
Forgery or fraud in documents
Judgments against the property, like liens and lawsuits
Unrecorded easements and covenants that could restrict the use