When purchasing a home one of the things that buyerâ€™s will be asked is whether or not they wantReal Estate title insurance. Often times I find that home buyerâ€™s lament over this decision because of the expense involved. Real Estate title insurance is certainly not cheap!
While title insurance is a one time expense, it can be disturbing for a buyer tight on cash to have to come up with such a large unexpected expenditure. Real Estate title insurance can easily run into thousands of dollars in a home purchase. Unlike other insurance policies there is no monthly premiums with title insurance. It is a one time expense covering the owner until the property is sold.
One of the questions I get asked a lot by my clients is â€œshould I purchase title insuranceâ€™?
Let me first explain what title insurance is and what it covers. Real Estate title insurance is a type of insurance that covers financial loss from defects in title to real property and from the invalidity of mortgage liens.
A title policy is put in place to protect an ownerâ€™s or lenderâ€™s financial interest in a property against loss due to title defects, liens or other matters. The insurance will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the monetary loss incurred, up to the dollar amount of insurance provided for in the policy.
In my experience all major lenders require title insurance to protect their interest in the mortgage secured by real estate. This is called a lenders insurance policy.Â An ownerâ€™s insurance policy is not required but in my opinion is a highly valuable insurance that is risky not to have.
There is an opportunity for a buyer to get a substantial discount when they purchases both a lenders and ownerâ€™s policy at the same time. This is called a simultaneous issuance. For an enhanced policy, it runs about $4.00 per thousand based on purchase price + $175.00 in Massachusetts. This is a one time premium paid at closing which lasts the lifetime of the property ownership.
The Real Estate Title Search
Prior to a buyer taking title to a property or completing the â€œclosingâ€, the lender through which the borrower is getting the mortgage will have a title search done on the Real Estate.
The purpose of the title search is to find any defects in the title. There could be any number of defects including liens, unpaid Real Estate taxes, judgments, unpaid condo fees, or others.
If title defects are found the buyerâ€™s or lenderâ€™s lawyer will inform the buyer of such defects and then work towards getting them removed so that a clean and marketable title is given to the buyer.
Title insurance becomes of great value when something is discovered in the future that was not found when the initial title search was done.
A Title search starts with the most recent deed searching the grantees name (the person who holds title) back in time until the deed from which the grantee acquired the property is found.
That grantors name is then searched back in time in the grantees book to find when the grantor acquired the title as grantee. The typical title examination goes back fifty years but title insurance would cover beyond the fifty year search.
Anyone who has not purchased title insurance could surely tell you what a nightmare it can become without it!