Anytime you purchase a piece of property you will also be investing in a title insurance policy. While you may cringe at the idea of adding more money to your closing costs, there may come a time down the road when you’ll be glad you did.
So, what is title insurance? Let’s find out.
Understanding Title Insurance
In the early stages of purchasing a property, a title search will be done. This is a diligent review of all the public records associated with a property dating all the way back to its beginning. The title examiner looks closely at the chain of title to ensure the seller has the right to sell the property. They also make sure that there are no known issues with the title.
Once this is complete, a title commitment will be drawn up and will state the findings. It will offer you a title insurance policy because the title is free and clear. Or, it will require certain conditions to be met before the policy will be issued at the closing, such as satisfying a judgment that is attached to the property.
Unlike other types of insurance that insure you just in case something happens in the future, title insurance protects you from things that may have happened in the past. This is especially important since everything attached to the property becomes your responsibility once you take ownership. Should any title issues appear after you take title to the property, title insurance will protect you.
A few of the most common title issues that may arise later include:
Judgments
Liens, including judgment liens, tax liens, mechanic liens, etc.
Recording errors
Fraudulent or forged documents
Unknown heirs
Undiscovered will
Easements
Encroachments
Many of these issues can lead to a lengthy and costly fight to protect your property rights - and may even land you in the courtroom.
Lender’s Title Insurance vs. Owner’s Title Insurance
There are two types of title insurance you may be required to purchase when investing in a property. One is a lender’s title insurance policy (if you are taking out a mortgage) and the other is an owner’s title insurance policy. While they both protect against any title issues, it is who they protect that differs.
A lender’s title insurance policy is one that protects the lender. By loaning you money to purchase the property, they are taking a great risk. This policy protects their interest should any title issues appear before the mortgage is satisfied. Lenders commonly make purchasing this title insurance policy a condition of the loan.
An owner's title insurance policy protects the new owner of the property from any title issues. This policy is in place for as long as the owners or their heirs have an interest in it. In Florida, buying an owner’s title insurance policy is mandatory.
Both types of title insurance involve purchasing a policy for a one-time fee at closing. There are no other premiums to be paid for its protection.
Title Insurance at Haven Title
At Haven Title, we provide smooth, comfortable closings for our clients. That means making sure they have a good understanding of the process - including what title insurance is and how it benefits them.
Whether you are looking for a title company or would like to learn more about title insurance, contact Haven Title today at (813) 699-3054.