If this is your first time investing in real estate, you may be eager to sign a few documents, get the keys, and go. However, it is not that simple.
Real estate transactions involve a specific set of steps that must be followed to ensure the sale goes smoothly. And two major parts of that process include a title search and title insurance.
Why is a title search necessary? And what does title insurance cover? Let’s take a closer look.
Understanding Title Insurance
Once you make an offer and put down your earnest deposit, the title work commences - starting with a title search. This includes a thorough look at all the property’s records dating back 60 years. Not only is the title agent trying to confirm that the seller has the right to sell the property, but they are also looking for any title issues, including:
Judgments
Liens
Unpaid taxes
Bankruptcy filing
Unknown heirs
Easements
Forged deeds
Fraudulently-signed deeds
Erroneous recorded documents
Encroachments
Any of these issues - and others that cannot be found during a diligent title search - can interfere with your rights to your property, now and years down the road. Title insurance protects you should this happen.
Choosing to forego title insurance could be a costly mistake. If any of the above situations appear after you become the new owner of the property, fighting to maintain your property rights will become your responsibility. These debacles can last a long time and turn out to be very costly, too. Most homeowners find that ignoring the importance of title insurance is not worth the risk.
What Does Title Insurance Cover?
Title insurance covers issues with the title to the property that happened before you took ownership. It isn’t a preventative insurance against things that may happen in the future, but rather a protection from things that happened in the past - that may arise in the future. In other words, it is different from other types of insurance you may currently hold policies for.
As long as you or your heirs have an interest in the property, they will be protected under the title insurance policy.
Types of Title Insurance
There are two main types of title insurance - an owner's title insurance policy and a lender's title insurance policy. Although both offer protections against the above issues should they arise. The difference is who they protect.
An owner’s title insurance policy protects the new owner whereas a lender’s title insurance policy only protects the lender. One premium covers both policies and will be paid at closing and insure you for as long as you own an interest in the property. In Pennsylvania, it is customary for the buyer to pay for the title policies. Though, this can always be negotiated.
Learn More About Title Insurance
If you’d like to learn more about title insurance, the title experts at Liberty Land Transfer, Inc. are here to help you out. We’ve got over four decades of experience in the title industry, striving to meet the needs of our clients - and that includes answering questions about title insurance.
Contact us today at (717) 975-9915 or toll-free at (866) 216-9999.