Is title insurance necessary?

On Behalf of | Sep 3, 2020 | residential real estate, title insurance | 0 comments

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:

  1. 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.
  2. It typically covers common issues like fraud, forgery and undisclosed heirs, but additional coverage could drive up the price.
  3. The person who pays the title insurance varies from county to county here in Florida, but the seller is more likely to pay.
  4. 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.
  5. 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.