Basic Title Insurance Questions Answered
Buying or refinancing a home comes with plenty of decisions and responsibility. Title insurance is an important part of this process, though it often slips the minds of new buyers.
Acquiring title insurance involves actually involves two steps. First, a company or personal attorney will search the property records for anything that could cause a hiccup in the sale or transfer of ownership—clerical errors, mistakes in examining, mistakes in examining records, undisclosed heirs, omissions in deeds, unknown liens or fraud involving the deed. This step ensures that the owner actually owns the property, and is therefore capable of selling.
Jeremy Yohe, spokesman for the American Land Title Association in Washington DC, said, “One out of every three searches reveals a title or public record defect that’s fixed before the transaction closes.”
Next, the body performing the search contracts with an underwriting company to write a title insurance policy that will defend you in court if anyone challenges the legitimacy of your title and compensate you for your equity if you lose. Homebuyers usually need two policies: one for the buyer and another for the lender.
Consider these six questions to help make smart decisions regarding your title insurance.
Are prices regulated?
In most states prices are regulated, so the costs of the actual insurance itself won’t differ much between companies. But, ancillary expenses could vary vastly between different companies, so it is important to ask about the complete transaction prices, not just about the cost of the insurance.
In regulated areas, where costs are relatively similar, the most important factor in choosing a title company or attorney should be how thorough a job they will do.
What coverage do I need?
A typical owner’s policy protects against fraud, forgery, undisclosed heirs, and spousal claims, among a few additional contingencies. For additional coverage, figure in added costs.
Who usually pays?
This answer depends on location. In some states, buyers are responsible for paying for the two policies, but in other states, lenders are responsible.
Even if you are responsible for paying for the policies, Yohe reminds owners, “It can always be negotiable.”
Is the seller pushing a specific title company?
If you are paying, you have the right to choose the company. If you are not paying, but would still like to make the decision, be prepared to share some of the costs.
Be wary of a seller pushing his or her own title company. A title search is performed to find mistakes before you buy, so it is best to use one who hasn’t searched a certain property in the past.
Who do I trust?
Of the seller, real estate agent, and mortgage lender, your lender is typically the most trustworthy. The lender has a lot of money riding on the fact that the property is really yours.
How much reassurance do I need?
To ensure that the underwriting company issuing the policy is financially secure, check its ratings with companies like Fitch Ratings, Deomtech Inc., or A.M. Best Co.
Another smart option is to research the underwriter and title company or attorney online to see how past customers feel about their services.
Infinity Abstract & Title is attorney owned and compliant with all CFPB and ALTA-S standards. We proudly serve the Tampa area and the entire state of Florida with our experience and expertise in the title insurance industry. Visit infinityabstracttitle.com today to complete a Title Order Request form and learn more about our services!
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