A home purchase is a major commitment. For many people, it is the largest transaction that they ever complete. The process of buying real property is relatively complex. Buyers have to pay for inspections and appraisals to conform to the standards maintained by mortgage lenders.
They also typically need to pay for title insurance. Generally speaking, home buyers pay for two separate title insurance policies. One protects the buyer, and one protects their mortgage lenders. People may have the option of waiving the policy that covers their investments, but the lender’s policy is typically non-negotiable.
While it is rare that people need to make use of title insurance coverage, acquiring it is critical for protection during the home-buying process. What protection do people derive from a title policy?
The benefits of a title search
Title insurance companies may have to make large payments if there are ever successful claims against policies. As such, they typically do a thorough title search to limit their financial exposure when underwriting policies.
A review of the title history for a property could turn up issues that could lead to disputes later. In some cases, the title search process required to acquire a title insurance policy could lead to the buyer canceling the closing because there are issues with the chain of title for a property. They can then invest in a property that carries less risk.
Protection in the event of a claim
A variety of different scenarios could lead to a title claim against a property. Fraudulent deeds could lead to title disputes. So could a purchase involving a property sold during estate administration or after a divorce.
There are a host of different circumstances that could lead to title claims by an outside party. The policy the buyer carries helps protect their investment. Their policy can pay for legal representation as they seek to protect their interest in the property. The policy can also reimburse buyers for the loss of equity that they face if a title claim is successful and a judge rules in favor of the other party.
Learning more about the risks inherent in a residential real estate transaction can help buyers make the most of their protections. The title search process, as well as the title insurance policy purchased, can protect buyers from the loss of their investment in the future.
