What Exactly is a Title?

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What Exactly is a Title?

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My real estate agent and lender are telling me it’s time to choose a title company to close on my hopeful new property. What is a title?

A title is your right to own or use your property. A title also establishes any limitations on those rights.

 

What is title insurance?

If you’re buying a home, title insurance is a policy that protects your investment and property rights.

There are two different types of title insurance: an owner’s policy and a lender’s policy.

  1. A lender’s policy is usually required by the lender and only protects the lender’s financial interests. While the buyer is purchasing this policy as a term for the loan it only protects the lender.
  2. An owner’s policy is the best way to protect your property rights as the buyer. If the policy is good enough for the lender to require it as a term to close, it’s good for the buyer as well.

 

Why should I purchase owner’s title insurance?

Owner’s title insurance protects your investment in your property from certain future legal claims regarding ownership of your property. For a one-time fee, you and your heirs* receive coverage for as long as you own your home. The owner’s policy also covers potential legal fees and court costs for settling claims covered by your policy.

 

What does owner’s title insurance cover?

Sometimes undiscoverable defects can come up after the title search. Under an owner’s title insurance policy, you are protected against certain undiscovered errors in the title.

Title issues include unknown:

  • Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes
  • Pending legal action against the property that could affect you
  • Unknown heir of a previous owner who is claiming ownership of the property

 

Unforeseeable title claims include:

  • Forgery: making a false document
    • For example, the seller misrepresents the identity of the person who sold the property.
  • Fraud: deception to achieve unfair gain
    • For example, someone steals your identity and either sells your house without your knowledge or consent or takes out a second mortgage on the property and walks away with the money.
  • Clerical error: inconsistent paperwork and historical records
    • For example, an unforeseeable discrepancy in the property or fence line can cause confusion in ownership rights.

 

What does owner’s title insurance cost?

The one-time payment for owner’s title insurance is low relative to the value of your home. A typical title insurance policy costs around 0.5% of the home’s purchase price.

How long am I covered?

Your owner’s insurance policy lasts for as long as you or your heirs* own your property. Your life will change over time, but your peace of mind never will.