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Why Do I Need Title Insurance?

If you have been shopping around the real estate market in your area for a new home, at one point or another, someone has probably told you that you need title insurance. Even if you are just poking around, not dedicated to the idea of making a real estate transaction at all, someone has probably whispered the importance of title insurance to you already. But what you might not have been told in any detail is what title insurance actually is, what it does, and why that is so crucial.

In so many words, title insurance will protect both you – the party wanting to buy a home – and your lender from fraudulent or invalid titles that would prevent the seller from actually transferring ownership to you. Title insurance will actually be purchased one you put your signature on a purchase agreement, stating that you fully intend to purchase the home and the other party fully intends to sell it, fair and square. You can expect to pay around $1,000 for title insurance but sometimes the seller will agree to pay for it as a token of goodwill. So, now that you have it, what exactly does it do again?

Troubles Without Title Insurance

There are numerous ways a real estate transaction could go sideways due to an error with the title. In rare cases, you might be coerced into trying to buy a piece of property from a seller who is actually just a renter. In other situations, complications and intricacies hidden within old contracts or purchase agreements, such as co-purchasers or ex-spouses holding a claim over the home, can suddenly prevent you from owning the home you had your heart set on. Unfulfilled liens against the property might also entitle a bank or agency to a portion of the proceeds garnered by the sale of the property.

Without title insurance, any of these problems could cause you to lose any deposits you put down and the opportunity to purchase the home. With title insurance, you are in a much better position if you run into complications. Your title insurance should reimburse your initial down payments if the transaction is unable to complete, but it can also help you work out a deal that lets you buy the home despite the roadblocks.

Using a Title Search First

When you purchase title insurance, the company providing the insurance will also likely offer to perform a title search; if they do not, you should talk to your attorney about completing one. A title search is essentially an in-depth examination of the property’s title and any possible problems it could be hiding, even if that means diving decades into the past. A proper title search will identify title defects – one of the aforementioned troubles – early on and halt the transaction process until a solution can be made.

If you need more information about title insurance, real estate law, or how to purchase a home, you can contact Powell, Jackman, Stevens & Ricciardi, P.A. Our Fort Myers real estate attorneys can help you understand your rights and options as someone looking to buy a home, and what you should do if you do encounter a defective title. Call 239.970.6844 today to get a free consultation.

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