Although title insurance for property buyers is often misunderstood, it’s actually a fairly simple concept in real estate, and is just about as common as regular homeowners insurance. The intent of title insurance is to protect either the mortgage holder or the home buyer against unanticipated claims from a third-party, in which case either the lender or the borrower could suffer serious financial loss. That’s why there are two types of title insurance which can be purchased: an owner’s policy and a lender’s policy – both parties would need protection if an unexpected claim were to be upheld.
What does title insurance protect against?
Here are some of the most common scenarios which residential title insurance or commercial title insurance can protect a property owner from:
- forged title documents which are not considered valid by legal authorities
- titles which were recorded improperly or not recorded at all
- heirs to property which were previously unknown, and who come forward at the time of a real estate transaction
- liens, judgments, and back taxes on the property which were previously unidentified
- problems with financing the property that prove to be an obstacle during closing
- abandonment of the closing process by either the lender or the buyer, once the transaction is already in progress.
When does title insurance expire?
When a homeowner purchases title insurance for new property, it remains in effect pretty much indefinitely. That means an owner is protected for as long as he or she owns the house, and in some cases a really good policy can even protect the original homeowner after a sale has been made, and ownership passes on to another buyer. Heirs of the homeowner who purchased title insurance are also sometimes protected against any claims which might arise retroactive to the time of ownership.
In contrast, when a mortgage holder or lender purchases title insurance from a title company, the expiration date of the policy generally coincides with the date of the last payment on the mortgage. This is only logical, since by that time the lender has already received the full amount of payments due on the sold property.
Thus, title insurance serves a very valuable function in the real estate industry, because it establishes some measure of order and stability for the conduct of real estate transactions. If these protections were not in place, and all the possible disruptions were allowed to happen continuously, there would never be any certainty whatsoever in real estate transactions, and no buyers would ever have the confidence to make purchases.
Who sells title insurance?
There are many reputable and knowledgeable title insurance companies in the real estate business, and you or your agent should contact one of these at the time of your closing. A premier company like Jones & Raulston Title Insurance can handle all the details to properly set you up with insurance that will protect you against all kinds of unexpected title defects or claims. With Jones & Raulston as your title insurance company, you can rest assured that your property is safe from all manner of title defects and claims.