The median price of single-family homes was $270,000 in the last half of 2019, which was 8.3% more from 2018.
Home values in the U.S. have been experiencing steady growth. Have you ever thought that your title deed might be having defects despite buying your house for millions?
Well, you probably haven’t, and you might never know until it’s too late. Defects on a title deed can have grave financial implications. Worse still, you risk losing your house.
Fortunately, title insurance can protect you from this menace. So, what is title insurance? Click here to learn more about title insurance and how it protects your property.
What Is Title Insurance?
Title insurance is a kind of indemnity insurance protecting lenders and real estate owners against financial or property loss emanating from defects or encumbrances in a property’s title. Title insurance companies evaluate the history of a property to know if it has trouble spots. They further highlight potential issues that could render the property controversial.
Unlike other types of insurance that protect you from possible future events, title insurance digs into the past. Besides, it’s a one-off payment. The insurance covers defects such as unpaid property taxes, adverse ownership claims, title forgery, financial liens, erroneous title records, and property damage.
The two types of title insurance include the insurance bought by the real estate owner and the one by lenders. Property owners get the cover to protect the asset. Lenders get the title insurance to safeguard their interest on a property.
How Does Title Insurance Work?
If you’re an aspiring homeowner, understanding how title insurance works is an advantage. It would help to familiarize yourself with the title attached to the property. The title is the primary document that will prove property ownership.
A title has several points that show the actual ownership. They include liens that creditors attach to a property, chain of title, and encumbrances. Title companies search each title for any claims before issuance.
Companies search public records to establish legal ownership of a property. The title is deemed dirty if there are unresolved violations of the building code or if the survey was erroneous.
If the title is clean, you can go ahead to complete the home buying transaction. You’ll need the title insurance to cover you in case of eventualities after completing the transaction. Your title insurance agent will walk with you through the process.
The insurance professional helps set up an escrow account to hold the funds until the transactions are complete. After recording the home title, funds are paid to the relevant parties from escrow. Purchasing of the title insurance takes place at this point where the buying process is about to close.
In the U.S., the First American Corp, Fidelity National Financial, and Stewart Title Guaranty Co. are amongst the reliable title insurance underwriters. Your real estate agent will advise you on the best underwriter. The insurance policy will defend you if your title is challenged and compensate you for any losses.
Benefits of Title Insurance
Do you know what is title insurance and how important it is? As a homebuyer, you should seek to know more about the impacts of title insurance. Title insurance benefits go beyond the economic aspect.
Title insurance will cost you between 0.5% and 1% of the total property purchasing price. If you think the price is high, you don’t know what a fraudulent homebuying transaction can cost you! The money you pay for the title policy is nothing compared to what you’d lose with a contested or a faulty title deed.
Here are additional benefits of title insurance that you stand to enjoy;
Address Disputes in Ownership Claims
Title insurance is the best way to handle questionable ownership. With the policy, it’s easier to handle issues related to past title issues on the property, unclear titles, and any frauds on the document. Taking the policy will protect you against such contingencies.
Having a title insurance shields you financially from past claims on property ownership. Despite thorough background checks, protecting yourself will save you from such unforeseen circumstances.
Compliance with Real Estate Regulation & Development Act
RERA mandates landowners, constructors, and developers to purchase title insurance. This regulation aims to promote safety and uniformity in the real estate sector. The agency hopes to instill a protective layer to parties involved in the industry.
This statutory compliance will strengthen your property’s value. Consequently, it will boost your credit score.
You’ll Save Time and Money
Property title claims take an extended time and a considerable amount to resolve. As such, most insurance companies opt for out-of-court settlements. Title insurance will help you settle the disputes with minimal involvement.
With a one-time payment, you’ll get legal assistance for any claims that might arise. More importantly, your property will enjoy protection for about seven years.
Enjoy Peace of Mind
Home buying is a significant investment that you can’t afford to make costly errors. Having title insurance is one of the best ways you can feel secure with the investment. You’ll rest easy knowing that you won’t wake up to a contested property.
Investing in a credible property will make you feel at peace. With the title insurance, you won’t be haunted by past property frauds that can render the title obsolete. You will be confident as you make plans to upgrade your property.
Understanding What Is Title Insurance Should Be a Priority for Homebuyers
Discussions on title insurance are not common in typical home buying or selling transactions. Yet, title insurance plays a central role in ensuring that a transaction remains valid. Now that you know what is title insurance, purchasing a policy should be the next step.
The benefits you’ll get with title insurance will save you money and frustrations. You can start by researching and vetting some of the identified title insurance firms. Professional insurers give you more insights on how the policy works and the benefits of title insurance.
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