Title Insurance
Title insurance is a very important part of your purchase transaction in real estate. There are many parts of the transaction once your offer is accepted by a seller but one of the most important ones to be aware of has to do with title insurance. If you are getting a loan from a conventional lender or any other lender, you usually won’t have a choice and you will have to pay for title insurance or they will not fund your loan. If you’re paying cash, you have the option of not getting title insurance but it may be a good idea to do so anyway.
What exactly do you get when you buy title insurance? Title insurance is an insurance policy that guarantees that you have clear title to the property that you just purchased. The closing party (attorney or title agency) researches the history of ownership on the property and checks for outstanding liens or other claims on your property that would affect your ownership of the property once you close. These other claims are called clouds on title because they affect the clear title to the property. Sometimes, despite their best efforts, the closing company may not find all clouds and liens on title and those may come to light at a later time after closing. Title insurance will pay to clear up anything like that which was not apparent at the time of closing and not excluded from the policy at closing.
There are two forms of title insurance. Buyers with mortgages are required to purchase both forms at closing. Lenders coverage protects your lender if there is an issue with the title. The lender’s policy will only be up to the amount of the loan on the property. For example, you have a mortgage for $300,000 on a property and you purchased the property for $400,000. If there’s a cloud on title, the title insurer will fight the claim and if necessary pay off your loan. If you don’t have owner’s coverage, then your equity is gone. Most of the time however, buyers purchase owner’s coverage for their properties and that protects their equity up to the sales amount. An inflation rider can also be purchased that would protect your investment so that as your home values increase, your title insurance would increase accordingly.
Personally we recommend having a title insurance policy for your new purchase. It’s entirely possible for the title agent to miss liens on your property and if you don’t have title insurance you’ll be responsible for clearing those up by the time you go to sell the property if not before.
As always, for your real estate needs, give us a call at 239.293.0246. Mike Bryant, Realtor and Anna Bryant Attorney and Realtor, Naples, Bonita Springs, Estero and Marco Island.
