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What is Title Insurance? Ensuring you own your new home.

What is Title Insurance? How to ensure you own your home and choose a great title company.

By Endpoint Closing Team

Title insurance is one of the least understood, yet most important parts of buying real estate. It’s vital that real estate agents and mortgage loan officers know how to explain it. Buyers need to know the risks and should be aware of all the value it holds for them and their future property title.

What is Title Insurance?

As the term suggests, this is a type of insurance that covers your title to the property you are buying. It guarantees your rights of ownership and use, according to the title commitment.

When you buy a house, you don’t just want the keys to the front door. You want to know that you have the right to keep living there or to rent it out. You want to know that you really own your property, and what exactly you own vs don’t.

Title insurance gives you legal standing, protection, and assistance in case someone tries to dispute your use or ownership of the property. This can be more common than you think, and it won’t be a problem if you are covered by a good policy.

Why Do I Need Title Insurance?

In some cases you may be able to purchase a property without title insurance. That doesn’t mean it is ever wise though. Without insurance, everything you paid for the property, everything you put into it, and all of your hopes and dreams are up for grabs. All it takes is for someone else to claim they should have ownership to the property title, that part of the property is theirs, or that they have certain rights to parts of it, and you are going to be in a world of pain and stress.

Imagine you just bought your dream house on the water, and then find out someone else is making a claim to the waterfront portion of what you thought was your property. Or if they claim they were sold the mineral, oil, gas and timber rights and can start bulldozing your trees and drilling in your front lawn. Or maybe they have an old deed that says it is theirs. There goes everything.

Without a solid title insurance policy and all of the paperwork being recorded correctly, you might have the property sold out from underneath you without even knowing it, or may never be able to resell it.

Title Insurance vs. a Title Search

During the process of buying a home, your title company will conduct a title search. This means they check out everything on the history of that title. They will find out:

  • If there are any liens against the property
  • Who can legally sell it to you, and match that with your contract
  • If there are past due property taxes
  • If there are past due HOA or condo dues
  • Which lenders and creditors need to be paid off before you can buy it
  • If there are any unsettled building permit or code violation issues
  • The chain of title and who previous owners have been
  • The boundaries of the property you are buying
  • If any rights or access has been sold off

A title search provides all of this information, but does not actually offer title insurance. You need a policy to cover you against any missing information, unrecorded documents, or future claims.

Closing Costs & Title Insurance

Title insurance is a part of the settlement costs when you go into the closing process. It does not need to be paid until the time you exchange your funds for the title deeds and keys.

Title insurance rates are typically mandated by the state, so there is normally very little difference between most title companies and agents. These rates vary by state, and who traditionally pays them can vary by county. It may be normal for the seller to pay for your title insurance in one county. In another, the buyer may traditionally pay. How much it will run is based on the value of the property you are buying. Check a title company near you to see what rates are, or see Endpoints competitive title rates in Washington here.

Owner’s Title Insurance vs. Lenders’ Title Insurance

There are actually two types of title insurance policy:

  1. An owner’s policy
  2. A lender’s policy

If you will be using financing to purchase a home, you will find a lender’s policy is mandatory. No lender is going to take the risk of loaning on a property which doesn’t have the title insured. That says something, and suggests no one else should consider it either.

However, the lender policy only covers the lender. If there is an issue, they are the ones who are protected. This is where the owner policy comes in. You must get this if you want to be covered too. The great news is that this is very inexpensive when done at the same time, as all the work is already being done for the lender policy.

Other Title Services

Title insurance companies do a lot more than just title searches and issuing title policies. Other services they may provide (free or at an additional charge) include:

  • Ordering surveys
  • Requesting payoffs for liens on the property
  • Requesting estoppel letters from tenants (confirming the details and terms of tenancy)
  • Reviewing real estate contracts
  • Negotiating issues between buyer and seller
  • Negotiating lien payoffs amounts
  • Coordinating and supervising the closing
  • Holding deposits in escrow
  • Ensuring property taxes and insurances are paid
  • Preparing settlement statements
  • Notary services
  • Disbursing escrowed funds
  • Properly recording documents for your protection

How Do I Find a Title Agent Near Me?

There shouldn’t be too much of a price difference between title companies. When choosing, priority should be put on who has experience, a good reputation and provides great service. The wrong title company can really drop the ball, leading to unpaid taxes, unsatisfied mortgages from previous owners and big income tax bills. You want to make sure they do it right, and are likely to still be in business if you ever need to make a claim in the future.

It’s easy to hit Google or Siri to search for a “title agent near me.” A more reliable way to find the best agencies is to ask local professionals for their reviews and referrals, and find a company who works well with your title agent and lender to get the transaction closed swiftly and on time.

For reputable, reliable, and tech-enabled title agents, ask your real estate agent to check Endpoint’s services and competitive rates here.

 


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