The Value of Title Insurance: What You Need to Know

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It shouldn’t take a horror story to convince you that you need title insurance.  That said, many homebuyers are not even aware of why title insurance is vital to every real estate purchase.  Without it, your investment might cause you more heartache than enjoyment.

Take for example one Elizabeth family.   After years of saving, they were able to buy a home without turning to a mortgage lender.   They relied on the title search the seller gave them as it was only a couple of years old.   After all, it was evident that they were purchasing a home from someone with good standing in the community.

When it came down to reviewing the sale, the buyer’s attorney suggested that his clients secure a new title search.   Additionally, he made a strong push for the prospective owners to purchase title insurance.   The homeowners were reluctant to spend the extra money.   Essentially, they didn’t understand the value of a title insurance policy.

Unfortunately, this story does not have a happy ending.  There really is such a thing as being “penny wise and pound foolish.”   Within a few months, the new homeowners received notification of a lien against their property.  The debt was now passed on to them.  Surely an updated title search would have picked up on the property lien entered the year before.  Additionally, securing title insurance would have prevented the expensive consequences.

Title Insurance: What It Covers

More often than not, individuals who fail to purchase title insurance are cash buyers.  Although buying it makes sense, it is not a legal requirement.  Notwithstanding, conducting a title search and buying title insurance are critical.

First, what is a title search?   The words speak for themselves.  For the most part, title searches are conducted by companies that specialize in obtaining documentation regarding real property.  This includes searching for liens, judgments, and lawsuits.  Additionally, title searches provide information concerning ownership, as well as property dimensions.  Deed and mortgage documents are also retrieved as part of a title search.

When it comes to banks and other mortgage lenders, title searches are a matter of course.  Financial institutions will also require that you purchase title insurance for an amount that at least covers the mortgage.   The purpose of title insurance is to protect the real property investment against potential claims involving defects in the property title.  Some examples of what title insurance covers are the following:

  • Disputes about ownership (someone produces a will saying property was left to them)
  • Mechanic’s liens placed by unpaid home improvement contractors
  • Claims involving fraudulent transactions

As you can imagine, any of the preceding occurrences could be substantial.   If you didn’t purchase title insurance, you might find yourself facing severe financial consequences.  In that case, you should speak with an experienced real estate attorney to learn how to proceed.

Contact Us

Contact the Law Offices of Lawrence M. Centanni concerning your real estate purchase or sale.  Our experience can guide you through the process and help put your mind at ease.

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