Have you just come across ownership of a property through investing or inheriting? Are you currently shopping around for real estate title insurance? If so, then you need to understand what it is and why it’s such an important form of coverage to have.
Imagine finding out that there is a lien or defect in your title that causes you to take a loss on the property. With real estate title insurance, you can make sure that you don’t experience a financial setback from it.
Be sure to read below to learn all that you can about real estate title insurance and what it’s all about.
What is Title Insurance?
Imagine that you’ve just purchased a home for the first time. A few years go by and you start to make some finishing touches on the property to turn it into something that’s completely your own.
Then, you find out that someone has come from seemingly out of nowhere with documentation showing that they’re the rightful owner of the home’s title.
Unfortunately, this happens more often than you’d think. The USA’s recorder of deeds has never claimed to be clear of record-keeping errors. There may be someone out there who has the rightful ownership of your real estate title policy.
Real estate title insurance will help cover any financial needs in this situation. It can either cover the cost of completing your title rights or covering the loss if you lose ownership of the title outright.
Title insurance is used to cover one of two parties: the lender of a mortgage or a homeowner. If you’re currently paying a mortgage, then part of your payments goes towards the lender’s title insurance until you pay it off in full.
If you’re a homeowner, then you aren’t legally required to have it. However, not doing so can result in thousands of dollars in losses if there ends up being a fault in your home’s title.
What Does it Cover?
Now that you understand the idea of what title insurance can offer you you must understand the details of what it covers. Fortunately, it provides an elaborate form of protection from all kinds of title defection scenarios.
First, it can help protect you if it turns out that the property ownership rights were forged whenever they were transferred to you and put in your name.
Second, you’ll be covered if you find out that a filing or recording mistake leads to title confusion. This is one of the most common errors that occur with title ownership mix-ups.
There are also two common legal situations that you should be aware of:
- Property Lien– this is a legal form of protection for creditors. When they hand out a lien on a property, they contain the rights against that property. If they don’t get the compensation they’re entitled to, they can collect the house back to get what is owed to them.
- Property Easement– this is when the owner of a piece of land holds on to the title but allows someone else to use that land for one reason or another. If someone has an easement on the land your house resides on, the house may have been built or sold without their permission.
As you can see, property ownership can get messy. Having a real estate title insurance policy ensures that you don’t suffer a financial loss if you were to ever go through this scenario.
When Does the Policy Kick In?
There’s a common misconception about real estate title insurance that prevents many people from buying it.
Many homeowners believe that title insurance only protects your title from the date that you start paying for the policy. That couldn’t be further from the truth.
Perhaps the most convenient part of real estate title insurance is that it kicks in the day you purchase it and covers any title errors or defects that occurred in the past. That means that no matter when the error occurred, you can get coverage to ensure you either complete your ownership of the title or get compensated for the loss of the property.
How Much Will it Cost?
So, if you were to invest in real estate title insurance, how much would it end up costing you to do so? The answer to this question depends on several factors:
- The state you live in
- The type of title coverage you’re applying for
- How much the property costs upon your purchase
- Where the property is located
Generally speaking, your title insurance provider has a majority of control over the price that they set for you. However, states still regulate the price range to make sure it remains reasonable.
That said, you should expect to pay anywhere between $500 to up to $3,500 for your real estate title policy. If your property is on the smaller end, you can expect to pay between $500 to $1,500, give or take. If it’s a large estate, then expect to be in the higher end of that range.
Invest in Real Estate Title Insurance to Protect Yourself
now that you have seen an in-depth guide on what real estate title insurance is and why it is so important to your property ownership, be sure to invest in it right away.
Take the time to assess your situation. Do you need lenders’ title insurance or owners’ title insurance? How much should you expect to pay? Does it justify the cost (the answer is yes!)?
Be sure to browse our website for more articles on real estate title insurance, as well as many other helpful topics that you will enjoy.
