When you purchase real estate, you receive an official document called a title, which is meant to show or prove your ownership of that property. As a part of the purchasing process, your attorney and title company will review the title to see whether there are any past claims or liens against it.
On a rare occasion, an attorney might overlook something, or information relevant to the title may be concealed. What happens then? Well, if you purchased title insurance, you’ll be protected, and your property ownership will be maintained. Keep reading to learn more about title insurance and why it’s so important.
What Is Title Insurance?
Title insurance is a type of insurance designed to protect the policyholder should any problems with the title come to light. What could go wrong with a property title? The most common example is a previously unreported lien.
Say, for instance, your title services company conducts a title search prior to your purchase of the property. They fail to discover that Company X has a lien for $100,000 against the property. You find this out 5 years later when Company X shows up and attempts to collect their money. Without title insurance, as the current title holder, you’d be liable to pay that $100,000. If you have title insurance, it becomes your insurer’s responsibility to pay.
In addition to protecting you against unreported liens, title insurance protects you from unintentional errors in the filing of documents, forged ownership rights, and other title defects that originated prior to your purchase of the policy.
Who Needs Title Insurance?
Lenders always purchase title insurance as a part of the mortgage process. The bank needs to know that if a defect is discovered in the title, they are not liable for the damages. The cost of this title insurance is generally held in an escrow account by an escrow agency and passed on to the buyer during closing.
Homeowners are not required by law to buy title insurance, but it is a good idea. While there are only a few claims made on title insurance policies each year, learning that there’s a lien on your home can be financially devastating. Title insurance, by comparison, is very affordable. Plus, once you purchase a policy, it never expires. You are forever protected against any issues that may arise with your title.
It’s wise to buy title insurance when purchasing any property. However, it is especially important if you’re buying a home in foreclosure, as a short-sale, or at auction. Homes being sold in these ways are more likely to have a complicated history of ownership and title defects.
Title insurance is mandatory in PA and NJ for property purchases involving loans. While title insurance is not required for homeowners paying cash, it is still highly recommended. If you’re looking forr a title company Philadelphia, trust Heritage Land Transfer to save you many headaches in the future. Contact us today to learn more about our services. We’re a title company Pennsylvania and New Jerssey residents have depended on for over 30 years for title transfer, lender coordination, title distribution, contingency resolution, and more.