As the homebuyer, you purchase this insurance to protect the lender from any potential financial loss caused by title defects. As in, if an old mortgage, construction loan, or taxes appear, the mortgage lender would be on the hook for them as the party providing the money to buy the home and this insurance protects them from those surprises. HOWMUCH DOES IT COST? While the price can depend upon where you live, it’s a set fee in most states. This means you don’t really need to shop around to find a “good deal” or a “better price.” However, we do recommend that you speak with your real estate agent to learn more about the price of title insurance in your area. through any certified title company. Since the prices are often fixed by legislation at the state level, you want to work with a company that offers excellent service to all parties involved, including you, your real estate agent, your mortgage lender, and your seller. Typically, the seller buys title insurance on behalf of the buyer, and it’s a comprehensive policy purchased at closing. Title insurance might seem like an esoteric afterthought tacked onto closing costs — an extra you don’t really need. In reality, title insurance is a must-have element for every successful real estate transaction. • WHO PURCHASES IT? Title insurance is purchased
for assorted legal and financial concerns. The last thing you want to happen when you buy a home is to learn AFTER you bought it that you shouldn’t have been able to do so because of past activities. WHAT ARE THE DIFFERENT KINDS OF TITLE INSURANCE? Title insurance aims to protect all parties in a given real estate transaction. But for this to happen, the buyer needs two different kinds of insurance: Owner’s and Lender’s. Owner’s title insurance is purchased by the seller — aka the current owner of the property — to protect the buyer from the legal title defects. Sellers perform this service as a way to show that they’re selling the property in good faith. It’s their way of saying, “there aren’t any title defects on this home, and I want to guarantee it for you.”
WHAT ISATITLE DEFECT? A title defect is any bit of information, knowledge, or past activity that could keep you from owning a home. These include diverse scenarios such as: • Forgery and fraud • Incorrect documentation • Easements • Lawsuits • Liens (typically from unpaid construction bills) • Previously unknown heirs • Outstanding taxes and assessments • Opposing claims of ownership Simply put, think of title insurance as a home inspection for real estate records. Instead of examining the physical foundation and the overall health of the property, title insurance looks
Eric Fontanot is President of Patten Title Company, a full-service closing company with several locations in Texas.
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