What is Title Insurance?

Read more about what the title business is all about, and why it's important to you as a home buyer. 

Securing Your Home Ownership 

Title insurance secures your legal claim to the property you purchase and protects you against title "defects" -- legal rights to a property claimed by someone else. Defects can surface even after you've closed on the property. Furthermore, numerous circumstances can arise that keep you from having a “marketable” title and, thus, can hamper your ability to sell the property in the future, With title insurance, the title insurer not only pays the costs if you're ever forced to defend your ownership in court, but also covers loss if the title defects can't be settled.
Buying a lender's title insurance policy is required for obtaining a mortgage. This protects the lender against any title problems. To protect your interests, you'll also need owner's title insurance.

Two Choices for Title Insurance 

You can get title insurance through two sources: a title agency or a real estate attorney. A title agency not affiliated with a law firm is limited in the services it can provide, however. For example, the title agency can’t prepare contracts, resolve many title or inspection issues or give you legal advice on the documents you sign during closing. A real estate attorney can provide those services, in addition to preparing documents for closing and issuing your title insurance policy. And the attorney’s fees are usually about the same as those of the title agency. 

Title Search 

The process of obtaining title insurance starts with a title search. The goal of a title search is to assure you and the lender that the seller is the legal owner of the property and that there are no outstanding claims or liens against the property you are buying. Title searches can be time-intensive, with numerous records to be examined, including liens, records of deaths, divorces, court judgments, and contests over wills – all of which can affect ownership rights.
Even a thorough title examination might not reveal hidden defects, however. That could leave your ownership rights in question even after closing, and that’s why having title insurance is so important.
Examples of Hidden Defects: 
Forged deeds
Married seller who misrepresents himself or herself as single
Claims of undisclosed heirs
Clerical errors
Incorrect legal descriptions
Improperly probated wills
Confusion resulting from similar names
Again, the purpose of title insurance is to protect against these types of defects. The title examination by a trained professional provides the first level of protection. The title insurance policy provides protection for defects the title search might have missed.

Title "Exemptions" 

Exceptions are situations where the title owner has relinquished control over an aspect of the property. Many exceptions are beneficial, such as a utility easement; however, some exceptions can be problematic. If you engage a real estate attorney early, he or she will assist you in objecting to any problematic exceptions and the seller will have to respond. If the issues can't be resolved in a timely manner, only a real estate lawyer may provide legal advice regarding your options.

Supplementing a Standard Title Policy 

Sometimes extended coverage is needed to supplement a standard title policy. This extended coverage, also known as a special endorsement, is used most often to protect owners of condominiums and planned unit developments (PUDs). An attorney can advise you if special endorsements are needed.

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