Real estate title insurance is one of the best ways to ensure that the problems of the past don’t rise up suddenly when you purchase a titled property. That is exactly why it is such a recommended insurance plan for anyone who wants to insure their recently purchased real estate against potential costs and damages.
According to sunnyside title, getting real estate title insurance should be a major part of every real estate investor’s and estate buyer’s life because of their immense importance. However, many people are still unaware of the importance of the real estate insurance plan and how they work.
This leads to many estate buyers and investors missing out on them which can have drastic results if past tax records or ownership records come into question because of some unforeseen circumstance. If you too are one of the estate buyers who doesn’t fully understand how real estate title insurance works, then don’t worry because we have you covered.
In this article we will be listing several tips so that you can understand the various aspects of the real estate title insurance plan. Read the article till the end so that you don’t miss out on crucial details later on.
1. Understand the title insurance process
It is necessary that you understand how the title insurance process actually works to fully comprehend its various aspects. A title insurance is an insurance or financial protection provided by an insurer to an individual after they purchase a property for a fee. This financial protection comes into action when previously undisclosed issues come into the question to gain monetary or property gains from the new owner.
These issues can be anything such as a previously unknown heir to the estate, easements that weren’t recorded before, wrong legal descriptions of the property, zone violations and most commonly, unpaid property taxes. These issues normally get forwarded to the new owner and can cause them to either arrive at an agreement with the party or, in the worst case scenario, forfeit it.
The title insurance protects you in these disputes and ensures that you don’t get any financial harm inflicted your way. The insurance is a perfect way of covering up any potential losses that may arise after the property title’s sale as the losses after the ownership aren’t usually covered by the previous owner.
2. Learn about the different types of title insurance
Now that you know how the title insurance process works, it is time you find out about the different types of title insurances out there that benefit different parties in a real estate transaction or purchase. These types are –
1. Lender’s title insurance policy
The lender’s title insurance policy is a policy specially made for the mortgage lender that protects them from any financial harm that may come after future disputes after a real estate is purchased. As the disputes affect the financial value of the property, they can directly threaten a lower property value for the estate in case a mortgage lender decides to claim the property.
This is not at all an ideal scenario for a lender and thus they avail the title insurance specially catering to their demands and protect themselves from all sorts of potential financial loss. What’s more is that this title insurance is not purchased by the lender himself but rather the property buyer as a safeguard so that they don’t get in the middle of any financial dispute later on.
The amount offered by the policy is also directly proportional to the amount offered by the lender to the buyer as a loan.
2. Owner’s title insurance policy
An owner’s title insurance policy is more straightforward in its workings. This policy helps protect a new owner from any form of financial harm that may be incurred after a dispute regarding the estate’s title whose origin lies in the period before the new owner purchased the house. The amount of the insurance provided to the individual is directly attached to the price of the estate that the new owner bought it at.
What’s interesting about the policy is that it doesn’t need to be necessarily bought by the buyer himself. In fact, a seller themselves can offer title insurance to new buyers to give them some assurance that any future disputes against them are well protected and covered by the previous owner.
3. Recognize what title insurance covers
To completely understand how title insurance works, you also need to know what the insurance entails or covers in its policy. There are several scenarios covered by a title insurance such as –
• Foreclosures – A number of foreclosures that were missed by you, your agent or the seller may arise before you even take full control of the property. To avoid getting any financial drain from these foreclosures, getting title insurance is a must as it covers a number of foreclosures.
• Liens – Liens are your assets that go up for sale or ownership after a dispute arises. This normally occurs when services or businesses that worked on the estate previously were not paid their due and now hold the new owner at fault and claim their property’s assets. A title insurance ensures nothing of the sort happens in the first place.
• Easements – Issues that originated in the property before the estate was purchased but rose as an issue after your purchase can also be covered by your insurance as long as it is for legitimate easements such as important utility lines and systems. There are a number of other scenarios which are covered by the title insurance.
4. Consider if insurance is really important for you
Last but not the least, consider if the purchase is important for you. While most lenders necessarily require you to get title insurance, there are many that don’t if you provide them with assurance that the insurance isn’t necessary. However, we strongly recommend getting the insurance either way unless and until you know the seller personally and know that major disputes won’t arise.
There are several tips for understanding how real estate title insurance works, and we hope this article helped you realize some of them. If the article was insightful for you, please consider following our website for regular updates as it will help us out immensely.