Consumers often misunderstand some basic facts about title insurance. For example, many homebuyers find themselves at the closing table without knowing how to justify the cost of title insurance on top of all the other costs related to a property.
Title insurance protects both owners and lenders against the loss or damage that may occur due to liens encumbrances or defects in the title to a property. Title insurance is a one-time fee, and there are tiers of insurance coverage, including “Standard Owner’s Title Policy” and “Enhanced Owner’s Title Policy.”
Laws can vary among jurisdictions, as some require the seller to pay for the buyer’s policy, and some require the buyer to carry the burden of title insurance. Title insurance is recommended as it protects the homeowner and any heirs for life, whether or not they still own the property.
It is often beneficial to examine whether an extended policy, which is available in most states, is worth it. Here are three example situations where a homebuyer would regret not having a policy.
1. You receive a late notice in the mail for a loan you did not open. The notice says you have a home equity line of credit, but you do not.
After investigating the situation, you find out someone stole your identity and opened a loan in your name. The loan was a home equity line of credit, and your house, which was used as the collateral for the loan, is now in default and about to be foreclosed by the lender.
With an enhanced title policy you are covered from post-policy forgery, and you could file a title claim. Now the situations is the title company’s problem. Without this owner’s title insurance, it would be up to you to hire an attorney on your own.
2. You try to refinance or sell your house, only to find that your seller’s loan is still listed against your property.
Even worse, that loan is a credit line, which the lender did not close at the sale but instead let the seller run the line of credit up to its maximum.
Suppose there’s more bad news: the title company you closed with is not longer doing business. What are your options?
With title insurance, you could file a claim with the title underwriter who works to resolve your unfortunate situation without any additional cost to you. Without it, you have to hire a lawyer. If the situation doesn’t get resolved, you may have to pay off the lien just to sell your house.
3. Someone comes to your door claiming to be the wife of the seller who sold you the house, and she wants to know why you’re in her house.
You discover that the woman is actually the seller’s girlfriend, and you face a few problems. Fraud was committed in the sale of the property. You do not have a valid title. The person is likely due some amount from the sale, money which was already paid to the husband.
With owner’s title insurance, you can file a claim for the fraud, and you have protection against the woman’s claim against the property. Without the insurance, you again need a lawyer, and you could end up paying the woman to sign off her legal rights to the property.
Hopefully this gives some clarity to the value of title insurance. Homes can be our biggest assets, and it’s important to protect them as much as we can.
Title Insurance & Escrow & Closing Services with Lakeside Title Company
Lakeside Title Company’s corporate location is in Columbia, Maryland. Lakeside is a title insurance company that serves builders, lenders, and realtors in Maryland, Washington D.C., Northern Virginia, and Southern Pennsylvania. We service our clients from 16 different locations. To learn more about owner’s title insurance policies, please visit our homepage today to learn more about how we can serve you!
If you have a question for an attorney, please contact Lakeside Title Company’s affiliated law firm, Lakeside Law Firm, LLC.