Title insurance protects the buyer and lender in a real estate transaction from potential issues with the property’s title. The title refers to the legal document proving who owns a property. Having a clear title to a property to sell or borrow against it is vital. Title insurance protects against any loss or damage that may occur due to problems with the title.
Why Do You Need Title Insurance?
One of the main reasons people need title insurance is to protect themselves against hidden liens or judgments that may be attached to the property. These can include unpaid taxes, outstanding mortgages, or even lawsuit judgments. These liens or judgments can greatly reduce the property’s value and make it difficult to sell or borrow against it. Title insurance ensures that the buyer or lender is not held responsible for these issues.
Another reason people need title insurance is to protect against errors in public records. These errors can include mistakes in the property’s legal description or inaccuracies in the chain of title. These errors can make it difficult to sell or borrow against the property, and title insurance prevents the buyer or lender from being held responsible.
While title insurance protects both the buyer and the lender, the coverage differs for each party. Lender’s title insurance, also known as mortgagee’s title insurance, protects the lender’s interest in the property. The amount of the lender’s coverage is the amount of the loan owed by the buyer.
What Is Lender’s and Owner’s Title Insurance?
If the property is worth more than the loan amount, the coverage won’t be adequate for the buyer. The lender is only interested in protecting themselves. This type of insurance ensures that the lender’s interest in the property is valid and enforceable and that the lender can foreclose on the property if necessary.
On the other hand, owner’s title insurance, also known as borrower’s title insurance, protects the buyer’s interest in the property. The policy covers the full value of the property regardless of how big or small the mortgage amount is. This type of insurance ensures that the buyer’s property ownership is valid and that the buyer will not be held liable for any issues with the title.
Co-Op Buyers and Title Insurance
Co-op buyers have a different type of title insurance than buyers of a standard home. A co-op is real estate ownership where the buyer owns shares in a corporation that owns the building and the land. The buyer does not own the land or the building itself but has the right to live in a specific unit. Co-op title policies have been around for several decades and are specifically designed to protect a purchaser’s interest in a co-op.
In a co-op purchase, the buyer must typically purchase lender’s and owner’s title insurance. This is like standard title purchases on real estate transactions, with a few notable differences. The lender’s title insurance will protect the lender’s interest in the shares of the corporation. In contrast, the owner’s title insurance will protect the buyer’s interest in the corporation’s shares.
A co-op owner needs title insurance because they are still vulnerable to issues with the title, such as hidden liens or judgments. Additionally, co-op ownership can be complex, and it is important to have the added protection of title insurance to ensure the validity of the shares of the corporation and the buyer’s right to live in the specific unit.
Why Is Title Insurance Necessary?
Title insurance is an essential type of insurance that protects the buyer and lender in a real estate transaction from any potential issues with the property’s title. It is necessary to have a clear title to a property to sell or borrow against it. Title insurance ensures that the buyer or lender is not held responsible for issues such as hidden liens, judgments or errors in the public records. Co-op buyers have a different type of title insurance than buyers of a standard home. A co-op owner needs title insurance to ensure the validity of the shares of the corporation and the buyer’s right to live in the specific unit.
Professional and Competent Support
Cortes and Hay has provided title insurance to homeowners, landowners, co-op share owners, condo owners, and townhome owners for over half a century. They know the New Jersey market and the specific requirements of title policies and how they apply to your property purchase.
A title policy can help bring peace of mind in knowing that it will cover issues with the title if they arise. We would love to help! If you’re looking for additional title insurance information or want to purchase a title insurance policy, get in touch with us today.