Buyers and Title Insurance: Contributed by Doug Watson, CEO of Frontier Title
Why do buyers and title insurance go hand in hand? With more than five million homes sold annually in the United States, purchasing a home remains at the center of the American dream. A large percentage of these buyers will be making this major purchase for the first time, which can be an extremely stressful and overwhelming experience. Even for an experienced homebuyer, purchasing a home can be a daunting undertaking, as they are well aware of the stack of paperwork that must be completed in order to get the keys to their new home. One of the lesser-known aspects of purchasing a home is the role that title insurance plays within the closing process. Title insurance is a very important investment, so we’re sharing some information to help homebuyers better understand its role in the home buying process.
What is Title Insurance?
Title insurance protects real estate owners and lenders from property loss or damage they could experience from liens or defects in the property’s title. Unlike other insurance options that require monthly premiums, title insurance is a one-time fee paid by the buyer at the time of closing. Title insurance rates differ based on the value and location of the home being purchased. While title insurance is not mandatory, it is a strong investment.
Who is Title Insurance For?
Both homebuyers and lenders need title insurance in order to be insured against various possible title defects on a property. Prior to closing, the insurance company will run a title search on a property. This typically takes between two and three business days and statistics show that more than 33 percent of title searches result in a problem that must be resolved before closing. Liens or defects on the title can include tax liens, abstracts of judgment, child support liens or bankruptcies. A lien means another company or person has the right to keep possession of your property until your debt is repaid. Without title insurance, the new buyer would be responsible for clearing any defects that are on the property.