There are many things that could go wrong when you’re buying a house, but one thing that you probably don’t think of right off the bat is worrying about the title. However, if you’re deep into the home buying process, you should know that having title insurance is probably one of the most important things you could ever do to protect yourself from potential issues down the road after you’ve already purchased your home. In an easy comparison, you won’t drive a car around without first acquiring some type of insurance coverage. Your attitude about buying a home should be the same.
One thing that you should look for when buying a home is a clean or clear title. This is very important because the title is what proves your ownership of any property. If there are any pending unpaid taxes on the property, they remain charged against that property even after ownership has changed. The fees stay with the property, not the owner. If you inherit any unpaid taxes on a home—even when you didn’t know about them—you’ll be responsible to pay them off. Another thing that could go wrong with unclean titles is when a previous owner still can prove a claim to the property because of improper handling of the title paperwork. There could be liens against the property, or there could be plenty of other scenarios that could be a potential issue for you as a new homeowner.
What is Title Insurance?
The most obvious and practical solution is a title insurance. Title insurance policies are very different from other traditional insurance coverage. To get insurance on your title, you’d only need to pay a one-time fee and your property will be covered for as long as it remains under your name or the name of anyone else that might inherit the property from you. If you have to take a loan out in order to buy a property, this process is something that is automatically done. Lenders will require you to purchase title insurance to protect their investment. It makes utter sense, and it should make obvious sense to you as well if you were buying a property using your own assets. You’d want to be protected as well, and a title insurance is more than enough to protect you. This type of insurance basically legitimatizes any property-buying transaction even further.
Because you’re paying for a one-time fee, the way a title insurance will protect you is different from the way other insurance policies do. Most of the work of title insurance companies happens upfront with the goal of preventing surprises later on. Title insurance companies will typically conduct a thorough search for information about the property you’re interested in before the sale is final. Usually, the research process happens while you’re in escrow. Title companies will typically conduct a historical search on the property with focus on deeds, wills, and trusts that trace back to the property somehow. This trace could be done manually or digitally depending on the area and the property itself.
What are the Costs?
The cost of the title search and title insurance are usually combined. But it really depends on the area and the title company. The cost of title insurance will also vary from state to state. Typically, you can expect to pay anywhere from $1,000 to $4,000 per policy. This fee is paid up in one lump sum and it is typically paid before a title company does a search of any kind. It’s a necessary, practical, and cost-effective investment for those buyers that actually need it. There are ways you could save on title insurance if you’re willing to do a little bit of research. Shopping around will usually save you a little bit of money. You could also negotiate any additional fees with whatever company you decide to go with. Lastly, you could also ask the seller of the property to cover the title insurance expense for you. It’s not an unusual request, and it’s something that’s absolutely acceptable along the lines of negotiations. Either way, just make sure that you go with a reputable title insurance provider in the end. You wouldn’t want to deal with issues later on just because you decided to skimp on a good provider. Set aside enough funds particularly for title insurance just so you won’t have to worry about it later on.