Title Insurance: A Home Purchase Necessity

Title Insurance:

Necessity?

In working with buyers, I frequently get asked about the necessity of title insurance.  To every buyer, I discuss a variety of topics commonly arising during the home purchase process.

One of those items will always be Title Insurance.  A buyer needs to know that the bank providing the loan will ask the buyer to pay for the lender's title insurance.  Banks seek this title insurance to ensure if anything is wrong with the title examination whether error or fraud that the bank has no financial exposure.

As I share with my clients, a buyer should be wise to protect them from financial exposure to unknown problems with the title received as ownership is transferred from Seller to Buyer.  Like any insurance, Owners Title Insurance is purchased for the possible unforeseen problem that can cause financial loss.  Unlike most insurances though,Owners Title Insurance is paid for at the time of settlement and no further payments are needed.

In fact, this title insurance is perpetual.  Even if an individual buys and sells five homes over 20 years, if title insurance is purchased for each home, the individual is protected against loss as relates to the title for any home purchased and/or sold in the past.  The one caveat is the individual must have a copy of each home's Owners Title Insurance policy.   

Though you may know every bank that lent you money and know they are still in business(good luck with that!), the Lender Title Insurance does you no good as it insures the Lender(Bank's) financial interest only.   So Owners Title Insurance is a must.

Shred your copy of the deed when a home is sold but hang on to the Title Insurance forever!!!

To underscore the importance of title insurance, I have include Advance Title's recent handout on "why title insurance"

Please note:  all those scary things like forged signatures or inaccurate paperwork don't happen all the time.  But neither do car accidents and home fires!!!

Title Insurance is a Necessity

Common Home Buyer Mistakes to Avoid

Problems that

Plague Home

Buyers

Unfortunately, home buyers can make very costly, common mistakes.  Whether a 1st time buyer or a season home buyer,  home buyers can cause themselves problems that will cost them time and money.

These are common only due to the fact that the home buyer doesn't consult a Realtor early in the process or seeks to save money in the home buying process.    Seasoned advise from a Realtor can help smooth the home buying process and help the buyer understand where money can be wisely saved.

Below are the challenges that every buyer should avoid:

1.  Limiting homes searches to generic listing

       sites like Trulia, Zillow and Realtor.com

        and other similar sites

     Challenge: 

         Numerous homes shown are

         already under contract and the data

         provided is typically less detailed than

         Multiple Listing Service information.

         

2.  Starting serious stage of home search

        with out select a mortgage company

        an attaining a pre-approval

     Challenge:

         Sellers typically require a bank pre-

         approval with any offers.  Buyer risk

         losing offer, thus time and money 

         when financing is not secured. In 

         addition, the buyer may risk being

         interested in a home beyond his/her

         means.  Or they can be disappointed

         by the homes toured but could afford

         the benefits of higher priced homes.

3.    Failure to clearly identify key factors required

           of desired home.

      Challenge:
         Realtor and Buyer waste time in homes
         that fail to meet buyer's needs.  A 
         clear definition of home location, 
         features, size, yard type, etc. are 
         required prior to touring the 1st house.
         Remember: Criteria can change as 
         search continues!!

4.   Failure to get a Home Inspection
       
      Challenge:
         Home Inspections are typically 
         declined by a home buyer to save
         money.  Failure to complete a
         home inspection with a licensed
         home inspector is a fatal error.

5.   Failure to get a Survey
       
      Challenge:
         Typically, in most states, a survey is 
         required to do any modifications to 
         structures on the property or to add
         an addition(even a swimming pool!) or          to fence the property. 
       
        Failure to get a survey as part of 
        home purchase process may cause the
        buyer to not be able to use the 
        property as desired due to unknown 
        easement, building set back and other
        restrictions.  Fencing present may also
        be shown to violate property lines.


 6.   Failure to get Owner's Title Insurance
       
      Challenge:
         The mortgage company will require a
         home buyer to purchase Lender Title
         Insurance, insuring the lender against
         any title defects or undisclosed future
         claims that were found through the
         title search conducted prior to final
         settlement.

          Home buyers believe Lender Title
          Insurance protects their title interest
          as they paid for this insurance. 
                    NOT TRUE!

          Owner's Title Insurance required to
          be purchased by a home buyer at
          settlement to protect the home 
          buyer from title defects due to:

           1. Prior stated Lender Title issue
           2. Wishing to Avoid Owner Title Fee