As a realtor, one of your primary objectives is the seamless, successful sale or purchase of a property for your clients. One of the biggest wrenches that can ruin a purchase before or after the fact is a title issue. Title insurance seems like one more fee to many homebuyers, but it serves a critical purpose. Educating your clients about the importance of title insurance is essential, but it’s hard to do if you don’t completely understand it yourself.
What Is Title Insurance?
Title insurance is a policy protecting against the financial devastation that can occur if a homeowner purchases a property that has legal issues, that has a lien against it or that the seller did not have the legal right to sell. An owner’s insurance policy protects the rights of the homebuyer. Banks and lenders also require the borrower to purchase a lender’s insurance policy on their behalf.
How Does It Protect Homebuyers?
Your client purchases a brand-new home from the homebuilder. However, the builder failed to make payments to the siding and roofing contractor. Since the contractor needs to be paid, the contractor filed a lien on the property. If your client does not have a title insurance policy, they are responsible for paying off the bill to remove the lien from the property. However, with an insurance policy, the client would be protected from the financial and legal responsibilities of absolving the lien.
The Most Common Claims
There are numerous things that can lead to a claim or disagreement on whether or not your client is the rightful owner of a property, including:
- The seller not being the actual property owner
- Forgery of documents including the wills, releases or deeds
- Missing or undisclosed heirs to the property
- Deeds by a minor, that misrepresent marital status or by someone deemed not of sound mind
- Misrepresentations of wills
- Liens for unpaid estate, inheritance, income or gift taxes
- Mistakes recording legal documents
The Two Policies
The homebuyer will cover both the lender’s policy and the buyer’s policy, although the latter is optional. The lender’s policy covers the cost of researching any claims and court costs as a result of the title dispute. An owner’s policy will cover the financial liability you could incur to fight the litigation. If the insurance company loses the battle over the title, your insurance policy will cover the costs and reimburse you for certain expenses. Both policies are only paid for once with a single premium at closing. If you decide to purchase a resale or refinance your home, you could be eligible to buy insurance at a reissue rate.
Title Insurance from Homeland Title & Escrow
Homeland Title & Escrow offers a broad range of title services, including complimentary consultations for first-time homebuyers. To learn more about our services, give us a call at (410) 544-6700.