When you’re buying or selling a property, there’s a lot to think about. One thing you don’t want to overlook is title insurance.
Title insurance is a type of insurance policy that protects you against financial loss if any issues arise with the title to the property. In real estate transactions, the seller usually pays for title insurance, but the buyer can choose to purchase their own policy.
To understand more about title insurance, let’s dive into the basics.
What is a title?
A title is a legal document that shows ownership of a property. In real estate transactions, the title is transferred from the seller to the buyer.
Why do you need title insurance?
When you buy a property, you want to make sure that the person selling it has the legal right to do so. However, there may be issues with the title that you’re not aware of, such as liens, unpaid taxes, or missing heirs. These issues can cause delays in the sale or even lead to legal disputes down the line.
Title insurance protects you against financial loss if any of these issues arise. If there’s a problem with the title, your title insurance policy will cover the cost of any legal fees or damages.
What does title insurance cover?
Title insurance policies vary, but they generally cover the following:
1. Unknown liens or encumbrances on the property
2. Fraud or forgery in the transfer of the title
3. Missing heirs who claim an interest in the property
4. Errors in the public record, such as incorrect survey or zoning information
5. Undisclosed easements or rights of way
What are the different types of title insurance?
There are two types of title insurance policies: owner’s policies and lender’s policies.
An owner’s policy protects the buyer’s investment in the property, while a lender’s policy protects the lender’s investment in the mortgage. In most cases, the buyer will purchase an owner’s policy and the lender will purchase a lender’s policy.
How much does title insurance cost?
The cost of title insurance varies depending on the location of the property, its value, and the policy amount. Generally, title insurance costs around 0.5% to 1% of the purchase price of the property.
While title insurance may seem like an additional expense, it’s a small price to pay for the peace of mind it provides. When you purchase a property, you’re making a significant investment, and title insurance ensures that investment is protected.
In conclusion, title insurance is an essential aspect of any real estate transaction. It protects both the buyer and lender from any issues that may arise with the title. While it’s not required in every state, it’s always a good idea to purchase title insurance to ensure your investment is protected. Always review and understand your policy to confirm what you’re covered for.