When purchasing a home, you receive a title
document. The title states that you are the owner of the property, and that you retain the rights to the property. While there aren’t typically issues relating to the true owner of a piece of land, questions do sometimes arise.
In some cases, a lawsuit may arise concerning the property’s true owner. There are many scenarios that can cause this quarrel to occur, including:
- Federal or state liens on the property.
- Unpaid homeowner’s association dues.
- Utility easements.
- Mechanic’s liens .
- Unnamed heirs to the property.
- “Wild deeds” that were never recorded.
In fact, this list is only a small portion of the full list of reasons why a title of ownership may be contested. It’s easy to think that none of these affect your property, but it is impossible to know for sure.
While you can never be certain of the fact that you are the sole title holder for your property, there is a way to protect yourself with an insurance policy. This policy is called “Title Insurance,” and it comes in two distinct forms.
Lender’s Policy
This policy, as the title suggests, is only issued to mortgage lenders. It is intended to protect the lender in the case that the property in question:
- Has a defective or unmarketable title.
- Is subject to title defects or liens.
- Cannot legally be accessed.
- Cannot have a lien.
- Is already subject to a mechanic’s lien.
In most cases, a lender’s policy will be required when you obtain a mortgage (just like they require that you have a home insurance policy). While your lender can require that you purchase a lender’s title insurance policy, they cannot legally require you to purchase from a specific insurance provider, as stated in the Real Estate Settlement Procedures Act ( RESPA ).
Take this as an opportunity to do your homework. Find an insurance provider that can offer you the protection you require at a price that fits your wallet.
Owner’s Policy
When your property is no longer covered by a lender’s policy (a lender’s policy is only valid while the property is under a mortgage) you should make sure that you are still protected by a title insurance policy. In this case, you will want to have an owner’s policy.
This policy will provide you with the protection you need, including coverage for any and all legal battles regarding your property’s title, and compensation for any financial losses related to those battles. Typically, the financial compensation that the policy will provide is capped at the value of the property, but this can be changed as a part of the insurance policy.
An owner’s policy is typically broken down into two types of costs: premiums and service fees. Just as with any type of insurance policy, a premium will cover the perpetual costs associated with the policy, and generally vary. In addition, you will be responsible for covering the cost of underwriting the policy and performing a title search. These costs are bundled and charged to you as a one-time “service fee.”
If you have questions about title insurance, or want to find a policy that will fit your needs, call 877-550-0025 and speak to a Vargas and Vargas Insurance representative!
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