Title insurance protects homebuyers and mortgage lenders from title defects during the purchase. About one-third of all real estate sales involve a defective title. This can jeopardize the valid ownership of the property, its value, and involve other legal damages. Title insurance pays if there is an issue.
A two-part process
Issuing this insurance is a two-part process. The first involves the title company or attorney checking to see if the title is clear – this means no unpaid taxes, pending legal action, undisclosed owners, administrative errors, or fraudulent actions. The title company will then contact an underwriting company to issue a title insurance policy. This policy pays for legal fees and compensates the buyer for lost equity if someone challenges the title.
5 crucial tips about title insurance
Every title issue will be a little different, but these tips can help avoid many problems:
- The Florida Department of Finance regulates the state’s title insurance rates, but it is still important to shop around because the quality of the policy’s coverage may differ.
- It typically covers common issues like fraud, forgery and undisclosed heirs, but additional coverage could drive up the price.
- The person who pays the title insurance varies from county to county here in Florida, but the seller is more likely to pay.
- The lender’s interests most closely align with the buyer’s, so listen to the lender when there are conflicting opinions on resolving a title issue.
- It is good to make sure the title insurance carrier is financially stable with a good rating. This helps ensure they will be there if needed.
Legal guidance may be necessary
Real estate attorneys can be a tremendous asset. More than navigating a closing or drafting a contract, they can provide a wealth of support to clients dealing with a title defect. These legal professionals can also help ensure that the title insurance policy fits the needs of the client.