How Does Title Insurance Work?

If you are interested in buying a house in the market, you will have to ascertain that the seller actually owns the house. Lack of proper title transfer documents can lead to legal complications and court cases after you buy the house and move into it.

Most home buyers hire an attorney to investigate the past history of the house title. The attorney will check the chain of the title. He or she will report any discrepancies or claims associated with the title. Most attorneys will also look for any back taxes that the sellers owe to the state. The attorney will issue a certificate after the investigation. You should, however, remember that this certificate or report is not fool-proof.

Many real estate professionals and experts, therefore, recommend title insurance. You can buy it from your lender or an independent insurance company. How does title insurance work?

The insurance offers protection against any defects or complications in the title document. The extent of coverage will depend on your policy. Many title insurance policies also cover building permit violations and encroachments. You should also remember that the policy will protect you for your purchase price but it may not offer any coverage on the equity of the house.

Title insurance premiums are paid only once during the initial purchase and title transfer. The buyers can choose to buy the policy themselves. You can also negotiate with the seller about the policy. Sellers and buyers may also decide to split the title insurance premiums. If you plan to sell the property in two years, you can sign up for a binder policy that offers protection for a shorter period of time. You can lower your title insurance costs with such a policy.

You should consider several factors before buying the insurance policy. Make sure the insurance company is reliable. Talk to your friends and family members. You can also read online reviews from other users. Check the coverage. Most companies offer a basic policy and an extended protection policy. Read the fine print, and choose the one that is right for you. Title insurance coverage may also vary from state to state.

Understand the local laws and practices before signing up for it. If you are unsure of the policy, you may also consult a title attorney for advice. Title insurance is an important policy. It can help save a lot of time and hassles at a later stage. Take your time to shop for it.