Buying your first investment property is an exciting prospect. If you choose not to obtain title insurance with the home, it can expose your investment to certain risks, which this blog will cover below.
What is title insurance and why does it matter?
Title insurance is a single-payment policy designed to protect property owners against financial loss caused by hidden defects in a property’s title. It covers issues that existed prior to your purchase, such as unpaid back taxes, liens or fraudulent transfers.
What if someone else claims ownership?
One of the most unsettling scenarios you could face is a third party claiming they have a legal right to the property you just bought. This situation can happen due to issues such as improper title transfers, undisclosed heirs or forged documents.
These disputes can take months or even years to resolve through the court system. Without title insurance, you would be responsible for covering all legal fees and could potentially lose the asset entirely.
What if debts follow the property to you?
Another issue when purchasing real estate is that any existing liens attached to the deed could become your responsibility. These obligations may include:
- Unpaid property taxes from previous owners
- Construction liens from contractors or material suppliers who were never paid
- Judgment liens from lawsuits against prior owners
In Florida, tax liens take priority over all other claims, meaning they must be paid before you can sell or refinance the home. If these debts were not discovered during the closing process, you may find yourself paying for someone else’s financial mistakes.
What can you do to protect your investment?
If you are considering purchasing property without title insurance, you might want to request a comprehensive title search from a reputable company. This provides you with a detailed record of the ownership history, giving you insight into how you can fix issues that you might encounter.
Consulting with an attorney familiar with Florida’s real estate laws can also help you review all your legal documents and identify potential issues. There might be terms in the records or purchase agreement that legal counsel can help you interpret.
