What is Title Insurance?

What is title insurance?  What are you paying for, and why is title insurance is important?

Title insurance is a thorough search of public records to make sure there aren’t any risks that might affect the title to your desired property.  Once this search is complete, a Preliminary Report is issued.

A Preliminary Report contains information which can affect the close of escrow.  If there are any exceptions and exclusions, you will want to pay close attention to these details on the Preliminary Report.  These items are not covered under the title insurance.  After this is prepared, a policy of title insurance is issued.  Be advised, the policy title insurance is not a list of all liens, defects and encumbrances affecting the title to the property.

Why do you need title insurance?  A deed to the property is not all you need to prove ownership of the property.  You need to check that no one else has claims, liens or encumbrances on the property.  A Owner’s Title Insurance Policy protects you.  Your lender will also be getting a Lender’s Title Insurance Policy which protects the Lender.

Claims can surface after the close of escrow.  Unrecorded liens, missing heirs or unpaid taxes may pop up.  Your Owner’s Title Insurance Policy protects you by providing legal and financial redress.

Whenever I sit down with a seller, they ask what fees they can expect when they’re getting ready to close. Other than commission and state transfer tax, there is title insurance, which can be kind of pricey, but very important. The important thing to remember is that title insurance is a one-time fee that is paid for at the time of closing. The seller typically purchases it on the buyers behalf, so that they know that the property is going to be free and clear of any liens or clouds on title.

You might think that your home is free of any lien or clouds on title, but your builder or neighbor may have liens on your property.  If you buy a house where a contractor did some work for a previous owner but wasn’t paid, it could affect your ability to refinance down the road if there are liens against the property.

It is important to order and review a Preliminary Title Report and get title insurance in your real estate transaction.  I hope this answered your question of what is title insurance?  For more questions, please feel free to reach out to me!