Without title insurance, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records, or mistakes in examination of the title. As a result, you may be held accountable for prior liens, judgments or claims brought against your new property. If one of these claims were to occur, your owners title policy insures that you will be defended against covered claims up to the face value of the policy generally, the purchase price you paid for the property.
Risks of Not Having Title Insurance
Without title insurance, the risks are high for anyone looking to buy or sell a property. Let’s say a homebuyer spends months searching for the perfect house only to find out after closing that there are unpaid property taxes from the previous owner. If you do not have title insurance, the financial responsibility for back taxes rests solely on you. You would either need to pay off any overdue property taxes or risk losing the home to taxation authorities. Your owner’s title insurance policy would cover this situation and the title insurance underwriter would pay the past due tax balance, plus any accrued penalty and interest, in order to prevent you from incurring a financial loss.
Banks and other mortgage companies are also protected from unrecorded incidents, such as liens or rights of access, by the lender’s title insurance. If a borrower can’t make their loan payments and there are any problems with the property’s title, then the lender is insured for up to the value of the mortgage. Before continuing with purchase procedures, any real estate investor should
make sure that the property they are considering does not have a title issue. For instance, homes in foreclosure might have numerous prior issues that may resurface and harm an unsuspecting buyer; as a result, purchasing owner’s title insurance is suggested to protect against such unforeseen claims in the future.
How Much Does Title Insurance Cost?
The cost of owners title insurance is based upon the purchase price of your home and rates vary by state. The title search, examination, and anticipated cost of any title defects are additional factors that might affect the closing costs. Generally, sellers are required to convey clear and marketable title and thus would be responsible for the costs of curing known title defects prior to closing. At closing, you pay a single premium for an owners title insurance policy and a separate premium for the loan policy, which is required by the lender. If you purchase both an owners and lenders policy, you will be able to get a simultaneous issue rate on the policies. If you’re buying a resale home or refinancing, you may qualify for a “reissue” rate which is a lower rate tier since the title policy is already in force and the title research has been done.
Are you in need of title insurance? Centerview Title can help! Get a quote for title insurance here.