What Is Title Insurance and Do You Need It?

Let’s face it, if the home buying process was as easy as shopping on the Groupon Coupons page for Disney Store then there wouldn’t be any need for real estate agents. However, given that there are millions of agents around the country, it’s fair to say that the process isn’t all that smooth and can sometimes seem intimidating.


It is this feeling of intimidation that leads many homebuyers to forget small details and overlook important matters, leaving himself open to some serious conquests.


One of these processes is Title Insurance, and forgetting it can have serious financial consequences. Keep reading to find out more.


Let’s start with an example.


Imagine a scenario that involves the property you are looking to buy. In this scenario, roughly 50 years ago, the owner at the time passed away, leaving the property to his two children. However, as one of the children was away, the other forged their signature and took full ownership of the home.


This owner quickly sold the home to the owner you are buying it from, with this owner being none the wiser as to what has occurred.


Without performing your title insurance related due diligence, you complete this sale, handing over the check and in turn, receiving the keys to the property.


Now, continue to imagine that years into the future, the sibling finds out that they were entitled to half of the money from the sale before yours. Once they find out, they lodge a legal claim over the title of your home. Once investigated, your home will be placed up for sale, with the proceeds to first cover the siblings claim, and the remainder (if any) making its way to you.


In this situation, you end up with a mortgage for a home you don’t own and very little financial recompense from the sale.


While it can seem hyperbolic, this situation is very real and can happen to any homeowner who doesn’t take out title insurance.


How Does Title Insurance Protect You?

The first stage of the title insurance process is to perform a thorough investigation into the transfer history of your home’s title. This is performed by an agent who is trained in discovering anomalies with transfers and any inconsistency which could come back to cause problems.


Once the agent is satisfied with the condition of the title and its history, they will offer you a title insurance policy. For a single fee, this policy provides you with financial protection in the event that an issue like the one above occurs.


For example, if the above situation occurs and you have a title insurance policy, your title insurance provider will instead provide financial recompense against the claim, leaving the title of the property firmly in your hands.


It’s important to remember that title insurance can only be purchased prior to settlement. Once the keys and check have changed hands, it’s too late to take on this protection and you are left vulnerable to any potential claims which may be made.

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