For the unfamiliar, title insurance is just another piece of paper, an additional expense on top of the standard homebuying fees. But the benefits it offers are wide ranging and worth every penny. Read on to learn how title insurance protects buyers like you.
How Title Insurance Protects Homebuyers
Title issues, from clerical errors to forged wills, can crop up during and even after the homebuying process. When this happens, the transfer of the property’s ownership may be delayed or, worse, fall through the cracks. There is no assurance that you will get your money back as well, potentially resulting in significant financial losses.
With a title insurance policy, however, your investment is protected. Depending on the coverage, any fees you incur to resolve the issue will be reimbursed by the insurer. Moreover, title insurance can also help uphold your rights to live in the home should a claimant suddenly appear after the sale has been completed.
Coverage Areas of a Title Insurance Policy
Title insurance policies have an umbrella of covered risks, which normally include the most common potential hazards such as the following.
Conflicting details, incorrect filing, clerical errors, and encumbrances all fall under the “title defects” category. When any of these issues are found, the title is considered to be “bad” as well as “defective” or “clouded.” This renders the title impossible to transfer until they are corrected or resolved. Only then is the title considered “clear” and thus legally transferable.
Title fraud, also known as home title theft, is another possible issue that may arise regarding a property’s ownership. This crime involves two scenarios. First, an individual assumes your identity in order to transfer the title without your knowledge or consent. Second, you purchase a home from a seller posing as the owner of the home, with a fraudulent title in hand.
Fortunately, title theft is an uncommon occurrence. Moreover, banks and lending institutions are employing more due diligence procedures to prevent fraud in whatever shape or form. But just in case you fall victim to title theft, how title insurance protects buyers is by covering your legal fees and other financial loss (i.e. your earnest money deposit being reimbursed).
It is standard practice for banks and lenders to put a lien on the property the borrower purchased. In fact, mortgages themselves are a type of lien. It’s to protect the lender’s investment should the individual fail to repay the amount they borrowed. When that happens, the lender has the right to claim the home as a collateral until all the debt has been paid.
Don’t be scared if you discover a mortgage lien on the home you’re purchasing. As for the unpaid debt, it’s not your responsibility to cover for the seller. Contact your title insurance provider as soon as possible and follow their claim-filing procedures to prevent incurring financial loss.
A title covers what you own and how you own it. Naturally, that includes not only the actual structure of the home but the land it sits on and its dimensions as well. If a neighbor claims your property is encroaching on theirs, you have a boundary dispute on your hand.
Boundary or property line disputes aren’t always included in the coverage of most title insurance policies. But when they do happen, they can cause significant delays and financial loss. Err on the side of caution and consider getting a title insurance policy that includes boundary dispute coverage.
Local zoning laws lay down regulations on how a piece of land can and cannot be used. While it’s unlikely to violate a major zoning ordinance, you may still find yourself in hot water. Most sources of zoning violations have to do with home improvements.
Title insurance can’t protect buyers or make them exempt from local zoning laws. But if this is covered by your policy, it can protect you from forced remedy of violations. Take note, however, that different insurance companies have their own versions of zoning violations coverage.
The Role of a Title Company in the Homebuying Process
Title companies are the entities you go to explore your title insurance options. But beyond that, they also offer several services that can also protect you and your investment.
One of the most important services they offer is the title search, which uncovers any hidden defects about the home’s title. Additionally, title companies also offer escrow and closing services, with the latter finalizing the sale and transfer of the title to you.
Integrity Title & Escrow Company is One of the Most Trusted Title Companies in Maryland
We are a certified Women Business Enterprise (WBE) with over 40 years of combined experience in the fields of real estate and property law. Your title insurance won’t be the only thing protecting you as a buyer— we will, too.