Whether you’re thinking about selling your house or purchasing a new one, you most likely know that a title to a property refers to a document that serves as evidence, one that’ll ensure that the current owner is actually in legal possession of a property and the building or buildings located on it.
But, if you researched title insurance before opening this article, you might be wondering why the seller needs to pay for it. Luckily for all people that are wondering the same thing, our 2024 guide below will shed some light on the entire topic. Here are some answered FAQs about title insurance:
FAQ About Title Insurance
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What is it?
Just like any other insurance out there, title insurance is also a document that’ll protect real estate owners, as well as lending organizations against property loss or damage that might occur because of a wide range of liens, mistakes in the title, as well as liabilities. You should keep in mind, each of the policies will vary in conditions and terms, which basically means that each of them will be different.
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What Things Does it Include?
Other insurance policies such as flood insurance will provide you with coverage in case there is any damaging future event, however, title insurance will protect you from loss or defects that already exist in the title of the estate, meaning that you’re protected from some events that occurred in the past. For example, defects in the title like another individual claiming that they have the right to own a property, which can lead to some really expensive legal issues.
Hence, working with a company can help you with locating those issues in the title, but more importantly, they can assist you by telling you what steps you’ll need to take next. If they don’t locate any forgeries, liens, frauds, improperly recorded documents, and easements on the title, they’ll at least provide you with peace of mind since you won’t have to worry about being the only owner of the estate.
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How Much Does it Cost And Why Does The Seller Pay For it?
The expenses associated with title insurance can and most definitely will vary, however, in ranges from $500 to approximately $3.700, but this will, of course, depend on the state in which you live, the insurance company you choose to hire, as well as the overall price of the property. Although the terms and conditions can be negotiated, the seller of a house most commonly pays for the owner’s title insurance.
This has caused a lot of people to wonder why. Well, it’s quite easy to understand. As we’ve mentioned, a single mistake in the title can lead to some really expensive legal fees and expenses, hence, it’s frequently paid by the seller in order to protect the purchaser’s equity in the estate. Hence, in a way, they help the purchaser financially in the future, mostly because the mistake might have been caused by them.
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How is it Different Than Other Insurance Packages?
We previously mentioned that title insurance protects you from the mistakes and events that took place in the past. However, there are other ways that it’s different from other insurance packages. For instance, a title insurance policy is only purchased once, which means that you don’t have to pay monthly premiums like the ones you pay for your health, life, or vehicle. This means that it’s cheaper than other packages that you could opt for.
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Do I Really Need to Buy it?
Now, the very first thing that you should know about purchasing this coverage is that you don’t actually need it, nor are you required by law to obtain one, however, almost all experts will tell you that it’s better to get one. Why? Well, by doing so, you’ll be protected from any defects in the title, hence, you’ll be able to benefit from it. If you’ll be borrowing money from a lending organization such as a bank, they’ll benefit from it too.
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Who Perform The Actual Check?
This will, of course, depend on whom you choose to hire for the job. Nonetheless, after a lending firm or an escrow agent orders a title search, the title insurance agency or lawyer will start searching for any defects. Once they’re done, a preliminary report will be issued to the client for examination and approval. Once it is approved, the expenses are paid, the funds are distributed between parties, and the policy is created.
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Are There Different Types of it?
Yes, there are two common types of this coverage, lenders and owner’s insurance. The owner’s policy, as the name implies, insures a new homeowner and a lender’s coverage will insure a lending organization’s interest. In most situations, a lender will require this type of coverage, mostly because they’ll want to protect the investment they’re making. When it is provided, a lender will be more likely to approve your request.
The other type will last as long as you. What does this mean? Well, since you’re the policyholder (as well as your heirs), have an interest in real estate. This might even be after you’ve sold it. Depending on the local laws, regulations, and practices, you might pay an additional premium on the owner’s policy. Hence, before requesting a search, ask around and learn whether or not you’ll need to pay for this premium as well.
Conclusion
Although a lot of individuals don’t realize it, title insurance is extremely important, mostly because it will protect you from the mistakes that occurred in the past. Because of this, it’s most commonly paid for by the seller of an estate, as a way to protect the purchaser in the future.
So, since you now know everything there is about this type of coverage, you might not want to waste any more of your time reading articles similar to this one. Instead, if you’re planning on selling or purchasing a home, start searching for a company that’ll provide you with the coverage and peace of mind you require.