You’re buying a one of the Davie homes for sale. Congratulations! You’ve already been through the selection process, the offer, negotiations, inspections, and now you’re ready to close. After the close, except for the mortgage if you financed your purchase, you’ll own the home with no strings attached, right? If all goes well, the answer is yes.
But, there could be other people who have a claim against your ownership. To protect yourself and your home from that often costly situation, you need title insurance. Here are answers to some common title insurance questions.
What is Title Insurance?
A title is a legal document that identifies the person or people who own a piece of property. But, it’s important that you have a clear title, meaning that no other person or company can question your ownership. You get a clear title by hiring a title company to research public records to ensure that there are no liens or levys on your property.
Once the title company has determined that you have a clear title, they can issue title insurance to protect you in case something comes up later that questions your ownership. If that happens, it’s said that you have a “shadow” on your title. And, if you have title insurance, the title company will pay for resolving the issue.
Your lender will insist on having a lender’s title insurance policy, and you’ll typically pay for it as part of your closing costs. That insurance only protects the lender. Owner’s title insurance will protect you, but it is optional and some buyers question whether they need it.
How Often is There a Shadow on a Title?
American Land Title Association is one of the top title companies in the nation. A report they published indicates that they find and resolve problems with a title in 25% of the searches they perform. And, those are just the issues they find before closing. So, that’s a pretty good reason why you need title insurance. It can save you from running into bigger problems down the road.
How Could Someone Have a Lien Against My Home?
A lien is a legal claim to assets that have typically been used as collateral for a debt. Another type of shadow on a title can come from someone else claiming ownership. Here are just a few examples of how those things happen.
- Someone legally owned the home sometime during its existence and then died. If that person didn’t leave a will, and no heirs made a claim, the state of Florida decided how to dispose of the property. It may not happen often, but there are times when distant relatives find out about the homeowner’s death years later and they can dispute your ownership.
- The previous owner hired a contractor to do some renovation on the house, but the contractor didn’t pay the people who worked for him on the job. Those subcontractors can put a lien on the house to try to force the contractor to pay them. If you’ve closed on the house, the lien follows the property and you could be forced to pay to clear the lien.
- A divorcing couple owned the home, and one spouse sold the property without the other’s permission. That spouse would have a claim against your ownership.
How would you feel if you ended up paying those subcontractors $40,000? What would you do if someone had a claim against your ownership? The legal fees alone could be staggering.
Who Pays for the Title Insurance and What Does It Cover?
In Broward County, the buyer pays for the lender’s and owner’s insurance policy as a closing cost. Other counties have different rules, so be sure to check with your real estate agent. As a buyer, do you need title insurance? Think about what it would take to resolve these issues that a buyer’s insurance policy will typically cover. Policies are different, so be sure to read your policy carefully. Policies will usually cover the cost to investigate a claim, then either take it to court or settle it.
- When one party to the transaction wasn’t competent
- A prior deed that wasn’t recorded properly
- A prior mortgage or lien that was recorded, but that the seller didn’t disclose
- Liens that can’t be found on a records search such as a mechanics’ lien
- The cost to remove improvements to your home because the previous owner didn’t obtain building permits
The Conclusion: You Need Title Insurance
The cost for title insurance varies based on where your property is located and the purchase price. It also varies depending on whether you get coverage beyond the standard. But, when you think about everything that could possibly go wrong, it’s very cost effective.
It’s a one-time fee that is included in your closing costs, and it protects the large investment you have in your home. Typically, the insurance will pay out far more than it cost if you do run into a problem.
Think of it like any type of insurance. You purchase insurance for your home, not because a home burning down is a common occurrence, but because you want the peace of mind knowing that you’d be covered if it did.
Are you thinking of buying or selling? If you want to hire Realtors in Broward County, please consider the Teri Arbogast Real Estate Team. Check out our Google reviews, and you’ll see that our clients have lots of good things to say. We’re very proud of our five-star ratings on Google, Zillow, and other real estate review websites. We’d love to make you our next successful client! Call us at 954-242-8030 or send an email today.