Why You Need What Title Insurance Companies are Selling
Real estate attorneys and title insurance companies will tell you that you should not purchase a real estate without title insurance…and they are right. Title insurance will give you the protection you need in order to make the deal and feel good about it.
One pro about securing insurance from a title insurance company, is the title search.
Title Search — Purchasing title insurance will entitle you to have professionals at title insurance companies do a thorough search on all public records regarding the property you wish to purchase. The searches will involve public records that date back for years. The goal of the title search is to dig up any issues that could impact your ownership of the property.
The good thing about title insurance companies conducting a thorough title search is that a good number of any title issues that might arise can be found BEFORE you reach the closing process in the real estate transaction. When you have title insurance, many times these types of issues can be resolved before closing, not effecting the title transfer at all.
Different things that can be discovered when title insurance companies conduct a title search include:
- You will be able to determine if the previous owner has been sued or has any judgments against them. If yes, this may mean that they can’t legally sell their property until their legal issues have been resolved.
- Public records will also show if there are any unpaid taxes on the property in question.
- If a contractor has done work to the property, but are yet unpaid, this may turn up as liens against the property.
- Public records should also turn up any rights to the property. For example, if someone owns a right to put a road through a piece of your property, this is important information to have prior to taking ownership of the property.
Not all issues impacting ownership are revealed in a title search. However, another pro when securing insurance from title insurance companies is that you are covered for issues that may impact your ownership of a property, even after the deal has closed.
Here are some different things that can be discovered AFTER the real estate transaction has closed, but may still impact your ownership of a property:
Competency Issues — If a person sells his or her home, but then claims that he or she was not in a mentally competent state when making the real estate transaction, the transfer of property may not be legally binding.
Unidentified Spouse — It is possible that a former spouse may not be legally divorced from a property owner, and then come back into the picture to claim ownership of a property. They may argue that his or her spouse had no legal right to sell the property. It is possible that a spouse may not be identified in public records, making his or her existence a surprise if they turn up to file a claim on the property.
Fraud — Another thing that cannot be foreseen in a search by title insurance companies, is whether or not someone lied. If the previous owner impersonated someone, or forged a signature, it could potentially impact the transfer of property.
Clerical Issues — A search by title insurance companies could potentially miss something that may impact transfer of property if a clerical error has been made. Public record documents may have been missing when the search was conducted.
While there are many pros offered by title insurance companies, the one con is that you are paying insurance for something that you likely won’t need. Reports suggest that less than 10% of title insurance premiums are paid out to resolve claims, meaning that there are not a lot of claims made to title insurance companies.
However, it is impossible to foresee someone claiming mental incompetence, or a long lost heir popping back up into the picture. At least title insurance companies offer you the protection needed to confidently make your real estate deal. In the event of any of the above items coming to light after closing, you will be covered by you title insurance policy.