“What does title insurance cover” is a question that just about every potential homeowner asks themselves during the home buying process. It’s an understandable question; title insurance is not something at the front of a very crowded list of things to do in the home buying process.
Here’s the bottom line, however: title insurance is one of the more essential things you’ll purchase in the home buying process, and it’s critically important to know the basics of title insurance before you finish off buying your new home. So, in this blog post, we’re here to help. We’ll answer the “what does title insurance cover” question that you need to know and provide some tips about dealing with title insurance for your new home.
First off – let’s back up and provide a definition of what exactly title insurance is and what it covers in the home!
Title insurance offers you protection for a crucial, underlying aspect of the homeownership process. Title insurance ensures that you get protection from any errors in the “chain of ownership” that leads up to the person or organization selling you the house. Those critical errors (we’ll detail plenty of them later) can delay or even derail what should be a very smooth process in order to own your new piece of property.
So, title insurance is a necessity (and, usually, a legal requirement) within the entire homeownership process. Without it, you could open yourself up to serious financial and legal trouble.
Let’s address the big question here: what does title insurance cover?
The “big tent” answer to “what does title insurance cover” is “anything and everything that can disrupt your right to legally purchase the property.” You’d be surprised at just how many things there could be that might mess up your homeownership process. Let’s go over the most common problems here:
- First (and typically the most common) problem? Outstanding debts on the property. You never know what kind of financial problems prior owners might have had. If some prior owner owed money on the property – for previous contracting services, for example – those debts might transfer over to the new property. You just spent a ton of cash in order to purchase your new property. You shouldn’t have to pay for something that the prior owner owes! That’s one of the most important things that title insurance covers.
- Another answer to the question of “what does title insurance cover?” Any long-lost claimants to the property that might pop up in the process. Again, this is something that happens a lot when it comes to errors within title insurance, especially with much older houses. A person might think they have the right to sell the property – but, in actuality, an overlooked clause or will might actually say that a long-lost great aunt is the actual owner of the property. That could cause some significant delays in the ownership process.
- Encumbrances and easements are two very big “E” words that could cause big problems with the title insurance process. Encumbrances refer to another party, organization, or person that might actually have partial ownership of the property; obviously, they may not be keen on selling that portion of the property to a different person! The other “E” word is “easement.” An easement is an allowance on a property that allows some different party – usually a government organization or a company – to use part of that property for their own purposes. This could very easily complicate the homeownership process.
- Paperwork errors in government can also be a problem. Crazy as it may seem, the records that the government keeps do have occasional errors in it! Whether it’s a boundary dispute or something else in the chain of paperwork, those little errors can grow into big problems when it comes to securing ownership of the new property.
- As crazy as it may seem, forgeries are another problem when it comes to the question of “what does title insurance cover?” There is a lot of paperwork through that chain of ownership; somewhere down the line, there’s always a chance that some less-than-honest person could have forged a signature or two or even faked an identity. Again, this isn’t something that happens often – but it does happen.
There are a whole host of other elements that title insurance covers; those are only a few of the most common issues!
When it comes to the title insurance process, who actually performs the checking?
Here’s the good news: you don’t have to go through those miles and miles of documents going back years and years in order to determine that you can actually purchase the property! That’s a lot of work to do – especially with older houses that could have chains of ownership going back a hundred years or more.
Instead, the mortgage company or lender will find a party to perform that title check to make sure everything’s okay. That title check could get performed by either a real estate attorney or, more likely, a “title company.” A title company does all of the research necessary to make sure you can purchase your property.
The short answer to this question? It depends on the transaction. In most cases, you (as the home buyer) will end up forking out a little bit of money in order to pay for the title insurance process. However, under certain circumstances, you might be able to negotiate a different deal when it comes to paying for the title insurance. Talk this over with your mortgage broker or the seller of the property. If you feel comfortable in negotiating or talking through this specific process, you may be able to get them to pay for the title insurance – or knock that amount of the final selling price. Going this route all depends on your comfort level in negotiation, along with the parties actually providing the title insurance for the property and a host of other factors.
When it comes to the question of “what does title insurance cover,” the answers can be tricky. However, there’s some good news: we’re here as a resource! Go ahead and explore LemonBrew Abstract. This helpful website features innovative and helpful title and escrow services. With LemonBrew Abstract, the homeownership title insurance process is a breeze!
LemonBrew can also help guide you through everything related to the real estate process with one-on-one, experienced guidance. Match with a trained and experienced LemonBrew Partner Agent to help get the real estate process started and get you into your new home as quickly as possible.
Don’t forget to check out the articles on our engaging, comprehensive, and informative LemonBrew blog. There, you’ll find a vast library of real estate articles for your knowledge. Explore pieces including Title Insurance vs House Insurance: Do you need both?, What Do I Need to Buy a House?, and many others on the LemonBrew blog.