Buying a home is the most significant investment most Americans can expect to make. Homeownership appears to be a clear-cut process, that is until homeowners learn about the unclear relationship between home ownership and property rights. The property rights granted to you as a homeowner come from the legal language written into a title insurance policy.
Overview of Title Insurance
The primary goal of establishing a title insurance policy remains the same: To educate all parties involved in a real estate transaction about their legal rights and to ensure the transfer of a property in a secure and timely manner. Protecting all parties involved in a real estate transaction is the reason why companies develop title insurance policies. In the United States, every legal matter that influences the sale of a property goes into public records.
The first step in the real estate transaction process is to search public records to discover what party owns the property, as well as determine the financial interests that exist for the property. A title search sheds light on the potential legal issues that need to be fixed before the completion of a real estate transaction. Government involvement in the title search process includes participation by the clerk of courts and the recorder of deeds. Public records include documents such as liens, taxes, judgments, and sewer assessments. Questions to Ask Before Buying Title Insurance
Getting the most value out of title insurance involves knowing the right questions to ask.
Do States Regulate Title Insurance Prices?
Value starts with price, and depending on the list price of a home, title insurance costs can be expensive. To combat out of control title insurance costs, many states regulate the prices of policies. However, you still need to analyze two factors to ensure you get the most value out of a title insurance policy. First, the quality of the policy helps you understand the value of the policy. Second, a title insurance policy should include a comprehensive title search by a certified insurance underwriter.
How Much Coverage Should You Get?
Title insurance policies cover several legal circumstances like fraud, forgery, and a spousal claim on a property. The amount of coverage you decide to get directly influences the cost of a policy. For example, a policy that includes a restriction clause protects you financially if you violate the restrictions placed on your property by the neighborhood homeowners association. You have to decide if the extra cost of adding the restriction clause is worth it.
Which Party Pays for a Title Insurance Policy
Title insurance is a unique insurance policy because it covers the legal responsibilities of both the buyer and the lender. Whether you or the lender pays for title insurance depends on the state where you live. Sometimes, determining which party pays for title insurance varies from one county to an adjacent county. If you are on the legal hook for paying for both title insurance policies, shop around to find an insurer that offers discounts for customers that buy title insurance for both parties.
Does the Seller Promote a Title Insurance Company?
Beware the property seller who pushes a specific title insurance company. If you decide to pay the cost of title insurance for both you and the lender, then you have the legal right to select the company. When the seller pays for title insurance, the detailed results delivered by a search can include errors, as well as purposely concealed financial data that diminishes the value of the property.
Which Party Should I Trust the Most?
Title searches can produce an overwhelming amount of information, especially complicated financial data projections. You have to know which party offers the most accurate advice. Advice from the seller of a property and your real estate agent might be helpful, but information shared by your lender is the most trustworthy because the lender has a financial stake in a title insurance policy.
Do the work that is necessary to buy the right title insurance policy and you will sleep better in your dream home!
James Schroeder is an attorney licensed to practice in Ohio, Pennsylvania, New York, New Jersey and the District of Columbia.