If you are planning to purchase a piece of land, you may have questions about its value, what it can legally be used for, and how you can protect it. In fact, there is one form of insurance that can protect this type of property: title insurance – which is substantially different from other forms of protection. Here is a close look at title insurance and how it applies to vacant land. Including the answer to the question, do I need title insurance when buying land?
Why Is Title Insurance Necessary?
When you purchase a new home, an area of land, or any other property, there is always the possibility that you may face certain risks associated with errors committed by the previous owner. For example, the previous owner of your house may have failed to pay property taxes. Claims may also arise from encumbrances, due to contractors who say they were not paid for work completed on the home before you purchased it (mechanics liens), or because of a forged will or other legal document. This is why title insurance is different from other types of insurance: it protects you against claims from the past rather than future claims.
According to real estate expert Sandy Gadow, a former title and escrow officer, “historically, title insurance claims represent between 4% and 6% of the total revenue collected by title companies.” Title insurance is based upon the concept of “loss prevention”: the idea that time and money are primarily spent with the objective of stopping title issues from happening in the first place.
Protect Your Largest Investment
Much like a new house, a plot of land is a large investment that should be treated with care. This means that, aside from doing routine maintenance, it’s also important to protect it from anyone or anything that may harm it or claim ownership of it.
Do You Need Title Insurance On Land?
The answer to this question is a resounding yes. You should undoubtedly purchase a title insurance policy, regardless of the things that sit on your land. Additionally, be sure to remember that a deed simply grants a new individual ownership of a property but does may not necessarily terminate the ownership rights of previous owners. Even if your land is completely vacant, there may still be unanticipated issues concerning taxes, property lines and legal records, among other things. A reputable title insurance company can assist you with the process of handling these types of problems.
You should also know how land is zoned before you purchase it. This means going beyond simply learning the land’s zoning designation (i.e. “residential” or “commercial”); it is highly recommended that you find out what restrictions may apply to the land. You should also remain aware of any easements that may potentially render parts of your land unusable.
What Type Of Title Insurance Do You Need?
To protect your land, you need owner’s title insurance, which is substantially different from lender’s title insurance. The latter type of insurance policy shields a lender against prior lien rights which may arise to your property’s title, while the former protects you, the owner, from claims. Owner’s title insurance is a one-time payment that is generally paid at closing and is valid for as long as you retain an interest in your property.
The person responsible for paying for title insurance varies by state, so be sure to stay informed about your state’s laws regarding this subject. In certain states, your title insurance company may provide you with an itemized list of fees at closing. Don’t hesitate to reach out to an experienced real estate attorney or title agent for more information on this subject.
Schedule An Appointment With A Title Insurance Expert
Reach out to the professionals at Mathis Title Company in Fairfax, Virginia, for more information on owner’s title insurance and how it can protect you when purchasing land. We provide real estate settlement services (including title insurance) and legal advice to buyers and sellers.
During the sale and purchase of a home, Mathis will hold all funds in an escrow account prior to title transfer and closing. Once the title order has been approved, their examiner can begin a title search and you will be given a preliminary report to evaluate. Our agents will then reach out to a trusted underwriting company to issue an insurance policy. We offer both basic and extended owner’s policies, the latter of which can protect you from additional liabilities .
If you decide to refinance your property within 10 years, you may apply for title insurance reissue rate. Call Mathis Title Company today at (703) 214-4020 or contact us online to learn more about title insurance.