WHAT IS TITLE INSURANCE AND WHY DO YOU NEED TO PURCHASE IT?
Title insurance is a policy that ensures that you won’t have any unknown claims made to the ownership of your home. Below you are going to see a detailed description of what title insurance is and why it makes so much sense to have it.
Through the search and examination process, title insurance can identify defects, liens, and encumbrances in the chain of title that could negatively affect your ownership interests in the property. Protecting homeowners and lenders from actual financial loss in the event that certain covered problems develop regarding the rights to ownership of property.
While Massachusetts closing attorneys search and certify each title to real estate before a closing, there are often hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.
WHAT IS THE DIFFERENCE BETWEEN BANK REQUIRED AND OWNER POLICIES
Banks often require title insurance in transactions involving a mortgage lender in order to protect their interests. This is referred to as their “Loan Policy”. The premium involved is paid by the buyer, and is a portion of the cost of closing the sale.
On the other hand, the buyer can purchase a similar policy as a means of protecting their personal interests. This is referred to as the “Owner’s Policy”. Similar to the “Loan Policy”, it requires a premium. However, it will allow for more coverage and will provide a direct benefit to the buyer.
POTENTIAL PROBLEMS IT PROTECTS AGAINST
In addition to undischarged mortgages and the sudden appearance of unknown or missing heirs claiming an interest in the property, an owner’s policy of title insurance also covers a variety of other types of title defects, including:
- Faulty foreclosures
- Forged deeds, releases, or wills
- False impersonations of the true owner of the property
- Incorrect legal or boundary descriptions in documents
- Recording errors
- Real Estate Fraud
- Deeds by a minor
- Misinterpretations of wills
- Missing or undisclosed heirs to the property
- Deeds with misrepresentation of marital status
- Any Instruments executed under invalid or expired power of attorney
- Liens for unpaid estate, income, inheritance, or gift taxes
There is also a new extended or enhanced coverage policy available from all major title insurance companies which covers:
- Building permit violations
- Adverse possession or prescriptive easements
- Building encroachments
- Incorrect surveys
- Pre-existing violations of subdivision, zoning laws, restrictive covenants.
HOW MUCH DOES IT COST
Title insurance is a one-time expense paid at closing which covers the house until it is sold again. It is calculated based on the purchase price of your home. Make sure you shop around insurance companies to find the best deal. A good place to do some research is the American Land Title Association which has a search by geography function.
We at Tramontozzi Law Offices can help you understand local regulations, costs, and insurance company recommendations.
Tramontozzi Law Offices advises anyone purchasing a home to also purchase an owners policy. The cost of this insurance is a wise investment protecting the home owner from adverse title issues.
The closing attorney ensures that the title examination is done on the property, certifies that the title is “marketable,” and issues the title insurance policy. While all U.S. public lenders require lender’s policies of title insurance, closings attorneys should always recommend owner’s policies for buyers. The risk of losing your home without any pay out is much higher.
Use this handy calculator to get a better idea of the fees involved.
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