When purchasing a new home, the closing process can bring unforeseen issues to the surface. With one in three homes needing to have an issue resolved before the title is considered “clean” and ready to sell, there is a considerable need for having title insurance that can protect you. After all, there have been countless occasions where homeowners have gone through the process of purchasing their dream home, closing the deal, and moving in only to receive the unfortunate news that there’s a lien against the property.
When buying real estate- whether residential or commercial- you need to do all that you can to protect yourself. Aside from a lien, various common title insurance issues can end up preventing (or at the least slowing down) the home buying process. As an independent title insurance agency, we cannot stress the importance of protecting yourself with title insurance enough. But what exactly can title insurance do for you? What are some of the most common issues that can be prevented by having title insurance on hand? These are the questions that we here at Tryon Title will be answering today.
What is Title Insurance?
Before we discuss some of the most common issues that title insurance can prevent, you must understand what title insurance is and who it covers. Whenever a property is either bought, financed, or sold, a transaction record is typically filed within public archives. At the same time, documents that may impact the property ownership, such as liens or levies, are archived as well.
When you buy title insurance for your property, a title company is responsible for searching through these records to identify- and hopefully resolve- any number of common ownership issues. The title company’s first step is to search public records to verify the exact ownership status of the property. Next, it is an underwriter’s job to determine whether or not the property is eligible for insurance of the title.
No matter how skilled the title professional, sometimes not all problems associated with the property are uncovered through this initial search. That’s where title insurance comes in. Once the title company in question completes this initial search, it also provides insurance that will go a long way in protecting you if various issues are later uncovered.
Who is Covered By Title Insurance?
So who exactly is covered by a title insurance policy? To answer this question, we have to consider the fact that there are two primary types of title insurance: loan policies and owner’s policies.
A loan policy is issued to protect the interests of the lender and the lender alone. If you are lending, nearly all lenders will require that you purchase a lender’s policy. After all, they want to be protected if certain issues arise with the title to your property. Let’s say that someone that says they have a claim against the home sues. In this event, a lender’s policy protects the lender from financial loss. On the other hand, you will have no protection on your investment in the home, and you will be the one financially responsible. To protect your equity regarding a title problem, you will want to have an owner’s policy on hand.
An owner’s policy would provide you protection in the same scenario outlined above. Other common claims that an owner’s policy would protect you from include a previous owner’s failure to pay taxes on the home or a declaration from contractors who state that they weren’t paid for work on the house before you purchased it. Typically, you can shop for a title insurance provider separately from your mortgage.
As a tip when shopping for insurance, you can often save money if using the same title insurance provider for both your lender’s policy and owner’s policy. This is because costs are lower using the same provider rather than purchasing them separately.
The Title Search Process
If you’re wondering how the title search process works, allow us to explain! As stated above, before a title insurance company issues a policy, they will run a title search. The title search goes through public records to look for any number of issues with the title.
While many homebuyers assume that the seller is entitled to sell the home when purchasing, this isn’t always the case. A title search is meant to confirm the property’s rightful legal owner, preventing many issues in the future. Here are a few of the problems that a title search is meant to uncover:
- Legal description errors
- Unpaid property taxes
- Undisclosed property heirs
- Defects in notarization
- Filings for bankruptcy
- Outstanding lawsuits
- Other defects or mistakes with the title
Before your purchase of a home can go through, the property’s title must be “clean.” This means that the seller must be verified to own the property in question and have full legal rights to sell it to you. A title search will uncover any unforeseen issues in most cases. Still, if problems still arise after you purchase the home, title insurance can save you a lot of time, stress, and money.
What is Covered By Title Insurance?
Now that you know who title insurance covers and how a title search works to uncover issues that could cause you a severe headache, you may be wondering what a title insurance policy covers. After all, that’s the focus of this article!
Knowing how a title insurance policy works to protect you as the homeowner is valuable information. Because not every possible issue with a home’s title can be uncovered through the title search process, title insurance offers a wealth of protection to your assets. Here are some of the most common issues covered with an insurance policy.
Liens Against the Property
Liens against the property are one of the most common issues covered by an owner’s policy. These documents are legally attached to a property and indicate that the home’s owner owes debts to someone. Suppose liens are not uncovered in an initial title search. In that case, you can be responsible for paying the amount owed as the new homeowner. Insurance protects you from financial obligation if liens against the property pop up in the future. Common examples of liens include “mechanics” liens, also known as construction liens, or child support.
Let’s be frank about something: not everyone operates honestly. With home prices skyrocketing in many cities around the nation, there has been a rise in scammers illegally acquiring ownership of homes before flipping them for quick cash. This is often made possible through forged or otherwise fraudulent signatures.
When this happens, the people that purchase these homes are put at significant risk. Put simply, they are paying for a home that they don’t actually own. When a seller forges a deed, this makes the document completely invalid. In these unfortunate circumstances, an insurance policy can offer you significant protection.
Errors in Record-Keeping
Sometimes, a document may not show up in a title search for two reasons: the legal description is not referenced fully, or a name is misspelled. Regardless of these errors in record-keeping, however, the missing document (and all of the financial loss that the document entails) can still be tied to your property under the law. Without the protection that an insurance policy provides, this means that you could purchase the home under the open mortgage of the previous owner. If you cannot pay for it, you will be at risk of losing the home entirely. A title insurance policy offers you protection.
Although a tax search may show no delinquent taxes on property initially, that doesn’t mean that you, as the buyer, will not receive notification of delinquent back taxes after the closing occurs. Without insurance, these unpaid taxes could result in a hefty bill. Since you will have been provided documentation indicating that taxes were paid when working with a title insurance agency, an owner’s title insurance policy would cover such an expense.
How Much Does Title Insurance Cost?
According to the National Association of Independent Land Title Agents, you can expect to pay anywhere from a couple of hundred dollars to $2,000 for title insurance. That being said, the average cost of both a loaner’s and owner’s insurance policy is estimated to be around $1,374 for a home priced at the national median value of $200,000.
When shopping around for title insurance, you should know that quotes can vary by hundreds of dollars from one company to the next as many states allow insurers to set their rates. To get the most for your money, we highly recommend using an independent title insurance agency. There are many benefits to using an independent title insurance agency, including no conflicts of interest, better interaction among team members, more convenience and accessibility, and their ability to save you time.
The Benefits of Having Title Insurance
If you’re still unsure whether title insurance is worth the initial investment, allow us to convince you. As a homeowner, your property is your most significant investment. As your largest investment, your property has to be protected. An owner’s insurance policy provides you with certain benefits that can’t be understated. If you still feel as though you’re on the fence about purchasing insurance, here are the protections that you can enjoy by buying title insurance:
- Protection from the costs, attorney’s fees, and expenses resulting from defending against any issue covered by your policy
- Extended Protection for the entire length of time that you or your heirs own the property
- Security for the covered risks that don’t exceed the amount of insurance
- The priceless peace of mind that comes with the knowledge that you’re protected from financial loss from your covered claims
With North Carolina’s Top Independent Title Insurance Agency, We Have You Covered!
Here at Tryon Title, we have a passion for explaining the invaluable benefits you can receive through title insurance. Purchasing your dream home should be a pleasant and memorable event that you can look back on fondly with each new year spent in your home. If you are in the market for a new home in North Carolina, don’t trust just anyone to extend the protection and quality of services that you deserve- trust the best of the best! Without insurance, you will be at risk of losing so much.
At Tryon Title, we have made it our mission to provide the protection homeowners need when purchasing a home. Our team has worked tirelessly for over ten years to offer the fastest turnaround, the highest degree of accuracy, and unrivaled customer service in the Triangle. As a local business, we also understand the importance of understanding your needs as a North Carolinian. We treat our customers like family and will be there every step of the way, answering your questions and seeing to your concerns to the absolute best of our ability.
If you’re looking for unrivaled expertise and coverage that puts your best interests at heart, look no further than North Carolina’s top independent title insurance agency– Tryon Title! We look forward to assisting you with all of your title insurance needs. Contact us today to get started.