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Title Insurance
Title insurance is a type of insurance that helps protect against losses that could happen if you discover that someone else can claim ownership of your property after closing.
A title search is a close examination of all public records that involve the deed to a piece of real estate. All past deeds, wills, and trusts are looked at to make sure the title has passed correctly to each new owner. The judgments and prior mortgages and other liens need to be verified as being paid in full.
The search should uncover potential problems like right of ways, view easements, power line easements and mineral rights, claims by prior undisclosed heirs and pending legal actions.
A cloud is a problem that makes ownership questionable.
You should always get title insurance because no one is perfect. Even an expert title examiner can miss a defect that might come up later and cause problems.
The policy will cover corrections for problems that did not show up during the title search or were missed and it will cover errors in public records.
If there are problems found after closing the policy will pay your legal fees if you must go to court to defend your deed. If you lose the property the insurance should pay for your loss up to the amount of the policy.
The policy does not cover defects that occur after you purchase the property becomes yours. It also excludes problems with easements, mineral and air rights, and liens.
If you're paying cash for the property then you don't have to buy title insurance.
The policy is usually issued for the amount of the mortgage. It pays the lender if a problem surfaces. An owner's policy covers the property's full sales price and insures the owner against loss.
You pay for the insurance unless your state requires the home seller to pay. The buyers can ask the seller to pay for the policy.
A buyer may be able to save money on the title search and policy if the present owner's policy can be updated and reissued.
The premiums are usually paid in full with a 1 time fee which is usually part of the closing costs.
Title insurance is relatively inexpensive and can be one of the best purchases you'll make for your new home. It isn't a magic bullet, if problems occur you will still have to deal with them and it may not be easy to get actions from the title insurance company. But, you can sleep better knowing you have some protections if a long lost heir of the former owner shows up on your doorstep.
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