Title companies offer title insurance as one of their essential services to protect buyers. After all, any residential real estate investment comes with risks. Though optional, title insurance is now proving itself to be a must-have in today’s real estate market. Why?
What is Title Insurance?
When you invest in real estate, a title search will be performed to ensure that the seller has the authority to sell the property. It also looks for any title issues that will need to be addressed before the property can be transferred to you. As an example, any judgments or liens attached to the property will have to be satisfied, as well as any outstanding property taxes.
Once the title is deemed clear, you will be offered a title insurance policy just in case something was missed or didn’t appear on the title search. After all, owning a property for 20 years and receiving a claim to it due to an unknown heir can be quite shocking.
A few other common title defects that could surface later include:
- Recordation errors
- Forged or fraudulent deeds, mortgages, or satisfactions
Residential title insurance protects your property rights. Any title issues or defects that appear after you have taken ownership will be handled thanks to your title insurance policy – without financial risk to you.
Owner’s vs. Homeowner’s Title Policies
It is important to recognize that there are a couple of different title policies that are usually offered for residential transactions, including an owner’s policy and a homeowner’s policy. While both provide you with title insurance coverage, they do have some variations.
You can expect each of these to cover you for things, such as third-party claims, prior forgery or fraud, liens or encumbrances, improperly executed documents, defective recording of documents, easements, and so forth.
So, are there differences? Yes. Before you purchase your residential title insurance, you should know that an owner’s title insurance policy will not protect you against:
- Unrecorded easements
- Parties in possession of the property that are not disclosed by the public records, such as tenants
- Encroachments and boundary-line disputes
- Mechanic’s liens
- Taxes or special assessments that are not shown in public records
This extended coverage is provided to those with a homeowner’s title policy.
Title Insurance in Today’s Real Estate Market
For years, there has been so much growth – historic growth – in the housing market nationwide. Since the second half of 2022, however, things have started to calm down. And, the industry has begun settling into its new normal.
Why is residential title insurance a must-have in today’s real estate market? What makes it such a priority for new home buyers?
An Overburdened System
Title companies were inundated with title work for the last few years. This has often meant adding new staff to keep up with the demand. In turn, county recorders have been overwhelmed with documents requiring recordation.
Overwhelmed systems need to allow room for error regardless of how diligent and meticulous the process is. This means that title issues may have been overlooked, documents pertaining to the property may have been improperly recorded, signatures on documents may have been missed, and so forth.
As a result, these issues may appear after you take title to the property.
The Introduction of New Technology
We cannot talk about today’s real estate industry without referring to the prevalence of automation and AI technology. Many title companies have started to incorporate this in their practice, especially as it pertains to title searches. While the technology is as incredible as the output, only time will tell if there are any pieces to the puzzle that have been overlooked.
Any mistake made before you took ownership can resurface and threaten your property rights. And since the possibility of this happening is real, it is highly beneficial to invest in a residential title insurance policy in order to guarantee rights to your property.
Your Residential Title Insurance Policy
Investing in a residential title insurance policy can offer you protection for as long as you or your heirs have an interest in that property.
All that is required for purchase is a low, one-time payment at closing. Though, the exact cost tends to vary as it is usually calculated as a percentage of the purchase price and will differ based on whether you choose an owner’s or homeowner’s policy.
Being protected by title insurance means that you are safe from:
- Unforeseen claims
- Title defects
- Financial risks
- Having to provide your own defense in court
You will have peace of mind as you look toward the future in your new home.
Learn More at Loudoun Commercial Title, LLC
Despite our name, the title experts at Loudoun Commercial Title are experienced and highly skilled at handling residential title services, too. To learn more about title insurance or to get started, contact us today at (703) 737-3800.