Title insurance: What is it and why do I need it?

Buying a home can be a happy, but stressful process.  As you pour over the documents that you are provided at closing, you notice a line for title insurance, and think why do I need that?

Title insurance is simply an insurance policy that the title you are about to take from the seller is free and clear of any issues.  When you purchase a home, the title company will research the title and make sure that the seller has the right to sell the property and its free from any liens or incumbrances.  However, sometimes the title work is not complete, due to an unknown issue in the history of the property.  Title insurance protects from those unknowns.  There could be an undiscovered issue, pending lawsuit or judgment that can cloud your legal title years down the road. A defect in the title could lead to a multitude of legal costs or at worst, loss of the property and all the money you have put in it.

Title insurance is purchased by both the lender and the buyer.  The lender will typically require the purchase of title insurance to protect their interest in the property.  Buyer title insurance is optional, but highly recommended.  It is billed as a one-time cost at closing and is not billed yearly or monthly.  Even though a seller transfers a deed with certain warranties, i.e. this title is free and clear, the risk also is transferred to the buyer.  A buyer’s title insurance policy protects the down payment any equity that has built up in the house.

The bottom line is buyer’s title insurance is a safe bet.  Some defects in title do not come up for many years when the owner has built up a lot of equity.  Title insurance would protect that equity.

Winslow, McCurry, & MacCormac proudly serves the greater Richmond area for all your real estate closing and litigation needs.  If you are buying a house, the settlement agent is your choice, so choose a law firm who is client focused and can guide you through the process.