Title insurance is a necessary policy when you buy real estate. It protects you from any losses that may arise from problems with the real estate title. Many property related attorneys provide this service in-house. If your legal representation on a closing also happens to provide title services than you will be able to kill two birds with one stone.
Before purchasing a title insurance policy, however, there are some factors that you should consider to help you choose the right title insurance policy for your needs and to protect you against overpricing. These are outlined below:
Policy Price
The owner’s title insurance policy is paid upfront. It is a one-time fee that you must pay to cover the purchase price of the property.
However, since the cost of the policy itself often excludes additional costs like wire transfer fees, you should make sure to ask for the gross amount you’ll have to pay when asking for a quote.
Quality of Title Search
When you purchase title insurance, the process starts with a title search to find out if there are any clerical errors, pending legal cases, undisclosed heirs, or ownership disputes tied to the title of the property.
Since the policy coverage will depend on the initial title search, you should make that they conduct a comprehensive title search so that undiscovered problems won’t cause bigger problems for you in the future. While the title insurance policy will protect you from such issues, coverage varies from one policy to another so certain issues may not be covered by your policy.
Type of Coverage
The owner’s policy is the standard policy for property buyers. However, if you’re borrowing money to purchase real estate, then you’ll also need a separate lender’s title insurance policy to protect your loan against any problems with the title.
Moreover, there are add-ons to the standard owner’s policy that you may want to avail of depending on your needs. These include, but are not limited to, an inflation rider (to cover the price increase of your property) and a restriction endorsement (to protect you against any claims if the construction of your home goes against policies of your subdivision).
Which Policies Are Your Paying For?
The question of who pays for the policy is an important one, as you’ll naturally want to know which policies you’ll be covering. This usually varies from state to state and country to country.
In some cases, the seller buys the owner’s policy and the buyer pays for the lender’s policy. However, the costs can also be split between the owner and the buyer, depending on local regulations and mutual agreement.
In any case, you should agree about who will cover these policies before the date of sale. You should also agree on which company you’re getting the policy from. For extra precaution, it is best if you get the owner’s policy from a new company rather than purchasing from the same company of the previous owner’s policy. This is because the quality of the title search is usually better if a new company handles the case.
Purchasing both the owner’s policy and lender’s policy from the same company can also get you discounts so you should consider purchasing both policies from one insurance company. In any event, when purchasing any residential or commercial property you will need to hire a real estate attorney. Your legal representative will be the best person to direct you in all title related issues.
