When purchasing a home, buyers find that there are more aspects to the transaction than they might have originally assumed. Once in the throes of the home-buying experience, the complexities of all of the tributaries that contribute to the process are revealed: the mortgage, title insurance, buyer and seller realtors, attorneys. By assembling a team of experts, home buyers become well-equipped to understand and handle all of the details that arise in making this purchase.
One of the least understood parts of home buying is title insurance. Buyers often wonder, "Why do I need title insurance?" Here is an overview to help home buyers understand just what it is and why they need it.
“It’s the first question clients ask me,” says Lisa Miglino, Vice President of Business Development for Appellate Land Services, LTD. “Few people really understand what title insurance is for.”
In short, the title company will check public records for the chain of ownership to make sure that the property being purchased had always been properly transferred and any previous debts tied to the property had been satisfied in a proper and legal manner. The title company then provides an insurance policy that covers the buyers against any past or future claims that might attach to the property.
“Imagine a house that has been vacated due to foreclosure,” Miglino says. “If an investor buys it for cash, after looking at the public records and seeing that $430,000 is owed to the bank and they buy that house without running a title report and buying title insurance, they could miss a sizeable tax lien against the home.”
Some savvy home buyers request title insurance to be purchased through reputable companies or contacts that they have personal relationships with, through friends and family. However, most property titles are ordered through buyer’s attorneys (for a purchase) or mortgage loan originators (for a refinance.)