What exactly is title insurance? And, why is it necessary when purchasing a home? The simplest explanation is that title insurance is another form of insurance for your home. Just as homeowner’s and flood insurance protect against loss from theft or fire or floods, title insurance protects the title to your home from financial loss. When you purchase a home, you’re not purchasing the actual land or the building, you are actually purchasing the title to the property (ie, the right to use and occupy the property).
The title to the home you intend to purchase may be affected by claims or rights filed by others, and these claims may limit your use of the property and may even cause financial loss. Therefore, by purchasing title insurance you are authorizing a search of public land records surrounding the property you intend to purchase. A title agency typically will conduct this search, and will look for any evidence of issues surrounding the title. For example, there may be a lien against the property due to the seller’s unpaid taxes, pending legal action against the property, or an unknown heir of a previous owner who claims ownership of the property. Being aware of these issues will enable you to require these issues be addressed before you take title to the property.
Title insurance is purchased just one time, not annually like other insurances. This one-time purchase will protect your title against any hazards and defects that may exist in the title. While this is just a quick summary of title insurance, I hope this has illuminated a common part of a real estate transaction. Every transaction is different, and I look forward to helping you navigate your own process as expediently as possible.