From the looks of it, the stranglehold that the housing market found itself in as a result of last decade’s recession is finally letting up. According to real estate site Zillow, millennials have entered the housing market and may well be the biggest home-buyers for 2015. They will be helped in this regard by historically-low mortgage rates which experts predict will continue for at least another quarter.
If you’re a millennial and a first-time home buyer, you’ve probably already mastered many of the important tools such as online mortgage calculators and internet sites like Trulia.com, Realtor.com and Zillow.com. You’ve learned the difference between a colonial and a ranch and probably have a secret wish list of features (Granite counter tops! Jetted Jacuzzi’s!). But chances are equally good that you don’t know that much about the one thing that could spell the difference between happy home-ownership and utter disaster: owner’s title insurance. Because if you have never owned real estate – whether it’s a home or a commercial building or a piece of land where your folks had a cabin in the Poconos – you have never had to think about it.
Let’s start with the basic idea of insurance: Having insurance means that someone else (the issuing insurance company) promises to bear some of the expense if a “covered event” happens. If your car is stolen, your automobile insurer will be liable to pay some (or all, depending on the policy) of the cost of replacing it. If you break your leg skiing, your health insurance will take care of some part of the expenses you incur for X-rays and physical therapy. So the concept is this: you pay the premium and the insurer stands ready to take specified action if the risk that is insured against occurs.
Title insurance is a product of the nature of real estate. You can see the property you are buying – the trees, the driveway, the house and the garage. But what you can’t see are the people who either owned it before you or the people who had some kind of claim against the previous owners, whether it was the contractor who installed the cool swimming pool or the roofing contractor who replaced the part of the roof that was damaged in Super Storm Sandy. If the prior owner didn’t pay those contractors in full, they might have asserted a claim (sometimes called a “lien”) against the house you want to buy. And without a title search – which the title company undertakes in connection with the issuance of a title policy – you may never know about those claims until it’s too late.
And here’s what else you don’t know. You don’t know whether the house you are buying was actually inherited by Bob, Steve and Mike when their parents died but that Bob and Steve didn’t tell Mike about it and waited until Mike was backpacking in South America to forge his name on the listing agreement and sales documents. What happens when Mike comes back from Patagonia and finds out that you’re living in Mom’s house? What do you do then?
You call your title insurer.
The truth is that things like that don’t happen very often. But if you buy title insurance (and if you are financing the purchase by use of a mortgage, your lender will always insist on that), the title company will defend your title to the property.
The fact is that you can live without granite counter tops – or install them later. The same with the Jacuzzi. But title insurance is critical when you are buying your new home because for the one-time charge you are assured that your investment is protected against claims involving the prior owners. Be sure to contact us to learn more about title insurance or first-time home buying.