Title insurance protects the insured (the buyer or lender) against financial loss resulting from a problem arising with the real estate title. If you have a car accident, your car insurance will pay to have your car repaired. Similarly, if a problem arises with title to your real estate, title insurance will defend a covered claim in court and pay out on the claim if required.
How often do I pay for title insurance?
Car insurance is paid every month or year whereas title insurance is only paid when you buy or take out a loan on real estate.
How much does title insurance cost?
The bulk of the fee is usually paid for by the seller and starts as low as $35.00 for $10,000 worth of coverage.
Real estate titles are much different than car titles. A car title shows the lien holder and the prior owner(s) right on the document. Real estate titles are much more complicated and real estate is often much more expensive than a vehicle. Title is transferred to real estate via a deed. There are several different types of deeds and some deeds convey nothing at all. A quit claim deed only conveys any interest the grantor (seller) may have in the property. If they have no ownership then the grantee (buyer) has nothing.
On a car title, there is a description of the car that is easily understandable i.e. 2008 Red Jeep Wrangler 12,000 miles. Lien holder: Big City Bank. Real estate titles often have legal descriptions that are difficult to understand even by professionals in the business i.e. Beginning at the Northwest corner of the Southeast quarter of the Southwest quarter of Section 13, Township 2 South, Range 3 East of the Third principal meridian, thence run East 13 rods, thence run south to the edge of the bluff, thence run West to the quarter quarter line, thence North to the point of beginning. This is a quick and easy description. Many can run several pages with lots of exception tracts and technical terminology.
Do title problems ever happen and what types of problems are they?
We see title problems every day. They normally are not caused by malicious sellers trying to defraud unsuspecting buyers. Most of the time, the sellers had no idea the problem even existed. They thought that mortgage was released. They thought their bank paid the real estate taxes. They thought the road was public. They had no idea the house wasn’t on the land they bought. They bought the property from the heirs of someone who had passed away and had no idea only two of the six heirs signed their deed.
Here are some questions to ask yourself before you spend your life savings and commit to the next 30 years of mortgage payments without being insured.
- How do you know if you are buying what you think you are buying?
- How do you know if there is a mortgage or two or three on the property?
- What if there are unpaid real estate taxes?
- What if the person who is selling it doesn’t really own it?
- What if the house you are about to buy doesn’t sit on the legal description you are buying and was accidentally built on the neighbor’s land?
- What if the road leading to the property isn’t public but privately owned and the owners gate the road the day after you buy the property?
These are issues we see every week at Title Professionals, Inc. and many others. We find them before you ever buy the property and make sure they get fixed before you close. If we don’t find a covered claim prior to closing, then you have the security and protection of First American Title Insurance Co. and Chicago Title Insurance Co., two of the largest title insurance underwriters in the world at your defense.