Title Insurance: What it is and do buyers need it?

Title insurance is always the first thing on your mind when you think of buying a house, right? Of course not! The team at Regal Homes knows that “Title Insurance” is something most buyers don’t fully understand until the day of closing therefore we would like to help shine some light on this often overlooked but very important detail. 

     There are two main aspects to Title Insurance. First the title company or whatever entity is performing the final closing, searches and investigates property records to ensure everything checks out. They look for possible undisclosed heirs, clerical errors, errors or omissions in deeds, mistakes in examining records, forgery, open permits, liens which have not been disclosed, fraud surrounding the deed or basically anything that reveals an issue that won't allow the seller to convey the property to the new owner free & clear. When these types of issues arise the title company along with the real estate team are most often able to correct issues for a clear title in order to close. 

     The second part of title insurance is the actual insurance. The title company uses an underwriting agency to issue an insurance policy. Typically there are 2 policies issued, one for the buyer and one for the lender. The buyer’s policy is referred to as the “Owner’s Title Policy”. In the event that anything was missed during the title search then this policy will insure the new owner against many of the possible unforeseen issues. The owners policy is paid by the buyer at closing, it's a one-time fee and lasts the duration of ownership, even extending to heirs. This is the title company's guarantee that they will represent their buyers and provide whatever funds and/or legal representation is needed if such a situation should arise. The second policy is called a “Lender's Policy”, lenders require this when they issue a loan and it is based on the dollar amount of the loan. As the name implies, it protects the lender if a title problem surfaces. The policy amount typically will decrease each year as the loan is paid off. 

     Although title insurance is not required by law, it's strongly recommended and it's no surprise why. Equally as important to having title insurance is making sure the title company is reputable, most often the real estate agent helping to facilitate the transaction will be able to recommend a few title companies. 
A good agent or the lender will also help ensure that the title insurance has been ordered early in the process to avoid any potential delays with closing. Title insurance is just one small part of the overall real estate transaction which is why it's beneficial to go through the home buying process with a great team behind you, it makes a big difference to know you are in good hands.  
The Regal Homes team is always available if you have any further questions about title insurance or any aspect of real estate!