A title search is among the most important steps in any transaction involving the purchase of a property. For example, if you’re purchasing a home, a title search will confirm the seller is the current owner and thus has a legal right to sell the home to you.
You can choose to purchase title insurance at this stage of the transaction. Although some may be reluctant to do so, worrying that purchasing title insurance will merely add to the cost of buying a home, it’s important to understand that buying title insurance can actually be a financially wise decision in the long run.
Title insurance guards against various losses you might otherwise incur as a result of defects in a property’s title. The following are noteworthy examples of what title insurance covers:
Disputes Regarding Ownership
Ideally, once you purchase a home or other such property, you can take full ownership of it without any complications. However, this isn’t always guaranteed.
Perhaps someone claims they are the true owner of a property after the transaction is already complete. Such a dispute could result in legal proceedings if the individual files a lawsuit. If this occurs, title insurance may cover the costs of said legal proceedings.
Fraud-Related Losses
The fact that someone represents themselves as the owner of a property doesn’t mean they’re always being truthful. Someone who claims to own a property may be committing fraud. Or, someone could forge the signature of a property’s genuine owner on a contract.
As the buyer of a property, you shouldn’t have to incur losses because someone else committed fraud or forged a signature. Title insurance can protect you against such losses in these circumstances.
Public Records Errors
A title search technically involves looking for title defects in public records. Unfortunately, public records aren’t always accurate.
Sometimes, public records contain errors. Sometimes, they contain omissions, in which important information regarding a property’s title is missing.
Potential issues with public records highlight yet another reason to buy owner’s title insurance when purchasing a property. Title insurance covers public records errors and omissions, ensuring these types of mistakes don’t result in losses for you.
Liens
There are various reasons an entity may place a lien on a property. For example, the IRS or the state might place a lien against a property for unpaid taxes. A mortgage lender may have a lien against a property if the owner defaults. In some instances, contractors even place liens on properties for unpaid work.
You don’t need to worry that you’ll incur losses due to liens on a property you’re buying. Title insurance covers liens.
Encumbrances
An encumbrance is another type of claim on a property that could potentially result in losses for a buyer who doesn’t purchase title insurance. The following are a few common examples of encumbrances that could theoretically affect a property’s value or the right of an owner to sell the property:
A utility company may have an easement on a property to install equipment.
An easement may exist on a property to allow a neighbor to access their own property.
A telecommunications company or other such entity may have leased a portion of a property to erect a cell tower or other such installation.
While the above are usually found in the title search, if they have been properly recorded and indexed. However, that is not always true! Again, you don’t need to fear that an encumbrance will negatively impact you financially when buying a property. You can protect yourself from losses by purchasing title insurance.
Title Insurance Offers Peace of Mind
Be aware that this is merely a general overview. What title insurance does not cover can vary depending on such factors as the specific details of a given insurance policy.
That said, what’s perhaps most important to take away from this guide is that title insurance offers you a substantial degree of financial protection when buying a home. Rather than adding to the cost of the transaction, title insurance could save you a lot of money in the long run.
Liberty Land Transfer is a Pennsylvania-based title company dedicated to fostering long-term relationships. Our clients appreciate our diligence, flexibility, and attention to service. Contact us to find out why we’re the right company for you.
At Liberty Land Transfer, we’d be more than happy to answer any other questions you may have on this subject. Contact us online or call us at (866) 216-9999 for more information.