Real Estate Today
Are you obligated to purchase title insurance as a buyer?
Cash buyers don’t have to pay for title insurance, but should ask the seller to pay for an “owner’s policy” at closing. If you are getting a mortgage, the lender requires a “lender’s policy” to insure their lien. This is usually paid for by the buyer at closing.
The “owner’s policy” coverage lasts as long as you or your heirs own the home. The “lender’s policy” will last as long as the mortgage remains on the property. The “lender’s policy” covers only the lender’s interest, but indicates that the title is probably clear. However, no search is 100% dependable; therefore, owners also need an “owner’s policy.” If you do not get an owner’s policy you will have no long-term coverage.
Title insurance protects you from past claims prior to ownership, not future events. This is a contrast from life or casualty insurance, which protects you from future events after the policy is issued.
As with most types of insurance, you can upgrade either policy. A lower-priced standard policy will not cover you for false claims that arise after you purchased the property. Many events beyond your control can reduce the value of your home after you buy it. For instance sub-contractors who claim they have not been paid by the builder may put a lien on the home after you have bought it.
To deal with these issues, an expanded coverage policy was developed called the ALTA Homeowner’s policy which will cover these types of claims. If you refinance, you will also need to provide a new lender’s policy. This will assure the lender that no liens or unsatisfied problems or encumbrances have been placed against the home.
There are many good title companies in our area, each providing various services, many at no charge. The sellers choose the title company since they are the ones who usually pay for the owner’s policy. However, that can be another negotiable point. Contact your Realtor who can recommend a good title insurance company. Until next week, keep smiling. Email your questions to firstname.lastname@example.org.