Have any questions about a title insurance policy? If you’re in the middle of the real estate ownership process, you’re not alone. Title insurance is a key component of any real estate transaction. However, many potential property owners might not know all they need to know about title insurance coverage as they embark on their real estate ownership journeys.
There’s no need to fear, however. The experts at Cortes & Hay are here to answer any questions you may have about title insurance. Here, we’ve collected 10 of the most common questions we hear about title insurance. Use this as a handy reference as you embark on your real estate transaction, and feel free to contact us with any further questions about title insurance.
Here are the most common questions (and answers) about title insurance:
1. Why is a title insurance policy necessary in the real estate process?
A title insurance policy offers the key players in any real estate transaction – both the lender and the potential property owner – protection against any monetary losses that may come from title issues (the title, FYI, is the actual right that the owner has to own the property and do what they want with it; a deed is the legal right to the property).
There is no one standard insurance policy for every title. Most of the time, the actual title insurance details will be determined at the time of purchase, when the mortgage process is well underway. Most title insurance policies, however, will provide financial coverage for these types of title issues:
- Defects in the title to the property that were not known during the mortgage or sale process
- A lien (a lien is a legal hold or a claim on a property to try to fulfill a debt) or another encumbrance (another lien or claim attached to the property that may reduce its value), unknown during the mortgage or sale process.
- Any forgery or fraud associated with the deed or any other transfer of property ownership; forgeries and frauds in the deed or other legal document history are more common than you may think
- Any error in the public record that could influence the sale.
An important note:
For owners, a policy is usually optional but highly recommended. If you purchase a property without title insurance, there’s a good chance you could be on the hook for a title issue that arises with a property sale. That could become a costly process (especially if a lawyer needs to get involved). Title insurance protects your significant investment; it gives you access to the peace of mind you need in what can be a stressful process.
However, it’s generally mandatory for a lender to require title insurance to protect their investment.
2. What are the different types of title insurance?
Title insurance protects all manner of property purchases. Here are the different categories:
- Residential title insurance protects homeowners and the lender from title issues that may arise during the process. There are two types of residential title protection insurance: lender title insurance (protecting the lender) and owner title insurance (which protects ownership).
- Commercial title insurance protects the property owner and the lender.
- Leasehold title insurance protects a tenant’s rights under a long-term lease; it covers (for example) commercial property, retail spaces, or residential units.
3. Who pays for the title insurance policy?
In most cases, the buyer will need to purchase title insurance during the real estate transaction. However, in some cases, the lender or seller may cover at least part of the cost of title insurance.
4. What exactly DOES title insurance cover?
Title insurance can cover:
- Financial losses against a valid title claim.
- Any omission errors that may take place during the title search.
- Potentially, any legal fees that could arise from dealing with a valid title claim.
5. What DOESN’T title insurance cover?
There are a few things that title insurance does NOT cover. These include things like:
- Any problems or issues that were already discovered before the purchase of title insurance.
- Any physical property damage
- Government regulations on the property, such as zoning laws and other land-use regulations.
6. What are the costs of title insurance?
The answer to the question about title insurance costs is simple: it varies. There are a host of factors – including the extent of coverage, location, and policy type – that may affect the bottom line. However, it’s important to know two things about title insurance costs:
- First, it’s a one-time fee calculated based on the home’s purchase price; ask your title insurance company or real estate agent for more information on this expense.
- Second, the costs that may arise from future title issues with home ownership could far outweigh the relatively small amount you might save at the start of the process by NOT having title insurance.
7. What’s the difference between title insurance and a title search?
Title insurance gives you access to coverage that protects you against any problems that arise with a title (like an undiscovered lien, tax, or other judgment); a title search, on the other hand, is the thorough examination that a company must do to discover any title issues that may arise during a real estate transaction. A thorough title search undertaken by trusted, experienced title companies is essential to ensure successful property ownership.
8. How do I get a title insurance policy?
As soon as you settle on a property and begin the purchasing/mortgage process, you’ll engage with a title insurance company. Look for a local, trusted, and experienced title company that can provide the service and intimate area knowledge needed for the process; your real estate agent may be able to point you in the right direction, or the lender may have one they prefer to use.
Once engaged, the title insurance agency will perform a thorough title search of public records to ensure there are no issues that may impede home ownership. At the property’s closing, the new owners will make a one-time premium payment for the policy and receive the policy information to prove free-and-clear ownership. Title insurance will protect the investment if any title issues arise in the future.
9. What is enhanced title insurance?
Enhanced title insurance provides an extra layer of protection for your property ownership. Enhanced title insurance goes above and beyond the standard protection provided by title insurance and a title search; it offers extended protection beyond fundamental title issues (like an undiscovered lien), expanding the protection to cover things like encroachments, boundary disputes, and other zoning problems. Talk to your title agent and real estate agent if you think that enhanced title insurance might be needed for your property purchase.
10. How long does the title insurance policy last?
Here’s the good news: after you purchase title insurance, you can access its benefits and security for as long as you own your property. In fact, your title insurance may also offer you protection for title issues that arose before your ownership.
Have any more title insurance questions?
Have any more title insurance questions – or are you ready to get started with an insurance policy for your real estate purchase? Let the experts at Cortes & Hay provide you with the reassurance that a local title insurance and title search company can. Our home title company professionals work with you and your real estate agent to secure the peace of mind that should come with every real estate transaction.