Home Title Insurance - What Is It, And Why Is It Necessary?
Home buyers understand the importance of purchasing a comprehensive home insurance plan
. In the event of damages caused by unforeseen natural disasters, flooding or fires, home owners feel safe knowing their insurance plans will protect them financially.Home title insurance works in a similar way, protecting home owners from legal attacks and ownership disputes on their new homes title, or deed. Although home title insurance transactions are often wrapped up in closing services and handled by real estate agents, property title searches and home title insurance plans are an essential part of every residential real estate transaction. Home buyers have the right to choose their own title insurance company, and understanding why residential title insurance is necessary helps property buyers make more informed and possibly more cost-effective decisions.
What is home title insurance?
Unlike home insurance, which protects home owners against unforeseen future disasters, home title insurance protects home owners against unknown errors or problems with their lands title which may have happened in the past. Like home insurance, purchasing house title insurance requires a thorough investigation of the homes land title, also known as a "property search", or "land title search". Home insurance companies performing residential property searches thoroughly investigate the land titles chain of ownership.
One out of every three Michigan land title searches reveal problems with the homes title which could result in lawsuits or financial losses for the owner later on. Common home title problems may include one or more of the following:
Inaccurate title records. Sometimes real estate ownership is not legally transferred by a previous owner, but erroneous title records can also be caused by simple clerical errors.
Government liens due to unpaid taxes. New property owners are financially responsible for any liens associated with their homes title, even if they were not privy to their existence.
Other liens. These could include unresolved mortgages, mechanics liens or preexisting leases.
The property search serves not only to uncover hidden problems or ownership conflicts with the homes land title, but it also works to resolve these issues before the sale closes. Home title companies are staffed with title insurance underwriters, title attorneys and home title insurance professionals who work behind the scenes to fix title discrepancies in order to give the real estate a "good title opinion". Once a homes title is deemed to be in "good standing", a home title insurance policy can be issued.
How Does Home Title Insurance Protect Me?
The protection home title insurance offers to home buyers is largely preemptive. By uncovering and resolving all preexisting title problems, title insurance agencies ensure that no future lawsuits or problems will occur.
Residential house title insurance does, however, also offer coverage against future lawsuits and financial losses. In the event that a lawsuit attacking the home buyers residential land title, home title insurance would cover the cost of legal defense and, in most cases, the cost of any financial loss as well.
What is the Cost of Home Title Insurance?
Typically included in overall title closing costs. home title insurance costs usually range from 3-5% of the cost of the total mortgage amount. Because title insurance agencies may need to perform extra legwork to resolve problems on the title, home title insurance costs tend to fluctuate from transaction to transaction.
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