What is Real Estate Title Insurance and Do I Really Need it?
The answer is YES! To understand why Title Insurance is so important we must understand a few things first.
What is a Title?
As a homebuyer, you are really purchasing the title to the property, which is the right to occupy and use the space. The right to clear Title can be contested based on prior rights and or claims that other people have asserted on the property. Claims can cost you lots of money and in the worst case you might even lose your new home!
What is a Title search?
Title Searches are detailed examinations of all the historical records pertaining to the property. Records include documents such as: court records, property and name indexes, deeds, tax records, judgments and much more. The reason this search is so important is that verifies the seller’s legal right to transfer ownership and to uncover any other rights or burdens on the property such as claims.
What can a Title Search reveal?
The reason there is a title search is to unearth any number of title defects and liens, as well as other encumbrances and restrictions. There could be defects such as: unpaid Real Estate taxes, unsatisfied mortgages, judgments and liens against the seller, Homeowners or Condo Association that have been unpaid and restrictions limiting the use of the land.
Are there any problems that a title search cannot reveal?
Yes. There is always the potential for some “hidden hazards” that even the most comprehensive title search may not reveal. These hidden hazards could include fraud such as a spouse incorrectly stating their marital status, forgery, clerical errors, mental incompetence and more. These defects can arise after you’ve purchased your home and can jeopardize your right to ownership. “Title insurance” protects your right to ownership.
What is title insurance?
Several years ago I had a nasty surprise! I purchased a property that had a tax lien against it that was not uncovered during the title search. As the current owner I was responsible for it even though it was a lien against previous owner. The Title Search had not uncovered this “hidden hazard” as the courts had not filed the lien properly. In this case, Title insurance was my policy of protection against loss. My Title Insurance came through and paid this tax lien claim against the Title to my home.
How does title insurance protect my investment if a claim should arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense — and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
What does title insurance cost?
The cost of title insurance varies based on the purchase price of the property. Unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only at settlement. The premium is figured based on the purchase price as follows; up to $100,000 = $5.75 per thousand, over $100,000 = $5.00 per thousand (ex: $100,000 = 575.00; $200,000 = $1,075.00).
Who pays for title insurance?
In Florida it varies per county and can be negotiated in the contract. The seller generally pays for the title insurance and chooses the title/closing company in Palm Beach County. The buyer generally pays for title insurance and chooses the title/closing company in the following counties; Sarasota, Collier, Miami Dade and Broward.