When sellers or buyers start looking through the laundry list of costs as part of buying or selling a home, they start looking for things to cut. One of those is title insurance. Depending on the contract negotiated, a seller or buyer may pay for this service, but it’s worth every penny paid for it.
Title insurance answers extremely important questions about a home. Without these answers, you might buy a home from a seller who can’t legally sell it.
Is There a Lien on This Home?
The most common finding in a title search - and where title insurance pays for itself - is when it uncovers tax liens and other monies owed against the property. These are problems for the seller to deal with - back taxes they “forgot” to pay, issues from their own purchase if they didn’t buy with a clear title, or legal issues that resulted in liens against the house.
Once a lien is applied to a property, it sticks to it like glue, regardless of who the owner is. If you were to buy the house with those liens, because you didn’t have a title company, you’d be responsible for the money owed. Most of the time, though, the seller can pay the lien with the proceeds of the sale of their home. If it can’t be worked out, though, you’re free to walk away and find another home to buy.
Can You Legally Buy This House?
One of the questions a title company answers for you is whether you have the legal standing to buy the house. While it’s rare, scams have surfaced over the years of non-owners attempting to sell a property. The title search is what keeps you from paying thousands of dollars and not getting a home out of the deal.
More common is that someone else may have a legal claim to the property. Sometimes it’s a divorced spouse or an unknown heir. The owner may have signed for the mortgage with someone else, and that person has to sign off on the purchase. What your title insurance buys, from the very beginning, is a reassurance that you can buy the house you want.
What if Someone Shows Up Later?
Have you ever heard of the nightmare scenario of someone showing up and claiming a home belongs to them? It’s a worst-case situation. The homeowner, hopefully, used title insurance even though they still have a nasty surprise from a long-lost relative no one ever heard of. Unfortunately, title insurance isn’t perfect 100 percent of the time.
What title insurance does offer is protection if this ever happens. While it’s extremely uncommon, no one wants to worry their home doesn’t actually belong to them - at least on paper. Depending on the policy, you’ll be protected financially if a court finds that the other person has a better claim to the property than you do.
Title insurance, at the most basic level, offers peace of mind. A title search tells you very early on in the buying process if there’s a problem with the property. Taxes and other money owed can often be dealt with throughout the process, barely slowing down the closing. Knowing that you can’t legally buy a property gives you the time to walk away and look for something else. And if the rare but worst case scenario happens, you’re covered financially for money you spent to buy a home that you shouldn’t have been able to purchase in the first place.
Are you ready to buy a new home - and work with a title company in the process? Contact me today. Let’s talk!