The home-buying process can be tough and challenging. But as the closing draws near, you likely find yourself daydreaming about the future your family will have in the property.
The last thing that will likely ever cross your mind is the possibility that it could all be taken from you due to an unforeseen property claim long after you have taken title to it. Yet, it happens more often than you’d think.
Thankfully, residential title insurance shields you from unforeseen property claims. Here is how it works.
What is Title Insurance?
When you begin the process of purchasing a property, your title company will do a thorough review of all the property’s records as far back as they go. They are looking for anything that may cloud the title, as well as confirming the seller has the legal authority to sell.
After it is complete, they will give the green light for you to move forward with the sale, offering you the opportunity to obtain title insurance just in case something was missed in the search.
There are two main types of title insurance — owner’s and lender’s. It is important to distinguish between the two since one will help shield you from unforeseen property claims and one will not.
Owner’s title insurance protects you as the new owner. And it protects against things that happened before you took ownership. Purchasing this policy is often recommended but not required.
A lender’s title insurance policy protects the lender. Often, purchasing this policy is a requirement of the loan. In other words, if you want to be able to get a mortgage for the property, you will need to have a lender’s title policy.
It is imperative that you understand a lender’s policy only shields the lender from any claims. It will not protect you. You will have to buy both policies for total protection.
What Does Title Insurance Protect You From?
What unforeseen claims does title insurance protect you from?
When you invest in a piece of real estate, you feel confident that once you sign the legal documents the property is all yours and no one else can have it — or even try to have it. However, that is simply not true.
A lot can happen throughout the life of a property. And, as much as we would like to think that a title search is foolproof, it isn’t. Records can be recorded improperly and not show up on the title search. A document signed that previously transferred property may have been forged. Or a mortgage satisfaction may have been filed fraudulently.
And these are just a few of the many different situations that can lead to unforeseen property claims against the property you now own. You may find yourself facing claims that include:
Unknown or missing wills
Legal description errors
Undisclosed or missing heirs
Outstanding judgments or liens
Unpaid taxes and other assessments
Impersonation of the legal owners
Your title company may offer you different types of owner’s title insurance, so be sure to take a look at each and gain an understanding of what unforeseen claims they will (or will not) cover.
How Title Insurance Works
What do you do if you receive a claim against your property?
Well, if you purchased the owner’s title insurance policy recommended by your title company, you can feel confident you won’t have to worry about financial loss. You submit the claim and the insurance carrier will take care of it. They will do everything they can to fight the claim. And, if for some reason, they are unsuccessful at doing so— you are insured for the price of the property.
If you decided not to purchase a title insurance policy? Let’s just say you may have a long, expensive fight ahead of you to keep your home, without any guarantee you will.
Don’t put yourself in this situation. Instead, invest in an owner’s title insurance policy.
Learn More About Title Insurance at Endeavor Title
Ready to learn more about title insurance and how it can keep you and your new home safe? The experts at Endeavor Title are here for you, answering all your title questions.
Contact us today to get started.