Title insurance is one of the many options available to protect your home after and during a purchase. Many people assume that it functions similarly to homeowner’s insurance; however, title insurance differs not only in the type of coverage it offers but also how you pay for it and more. As you prepare to take the next step in your home ownership journey, be sure that you understand what owner’s title insurance provides, who pays for owner’s title insurance and how to establish a policy.
Do Sellers Provide Title Insurance?
One of the most common misconceptions when buying a home is that it is either the responsibility or ability of the seller to provide title insurance to the new buyer. Some people believe that if the seller had title insurance of their own, then the property is protected, and that policy will transfer to them when the deed transfers. However, this is not true.
The standard Northern Virginia Board contract, which many realtors use, states that title must be insurable amongst other things. That means that if there are title discrepancies, the seller must act to fix those. The standard Northern Virginia Board contract also provides that Purchasers pay for the title insurance. BUT, as we have always stated, nothing is written in stone. If the parties agree to change the contract, strike through and initial those changed provisions, then the new provisions prevail.
The Difference Between Owner’s And Lender’s Policies
The buyer is responsible for taking the action to acquire an owner’s title insurance policy. If you have already viewed some of the paperwork for your purchase, you may have noted that the lender estimate has likely added a line item for title insurance. However, what you are likely looking at is the lender’s policy which provides protection only to the lender for their interest in your property.
If you acquire a mortgage for a home, the lender must ensure their investment is protected against loss. They typically require title insurance for their interests, and it is your responsibility as the buyer to provide this to them. The fee that you pay for title insurance when buying a house is most likely the policy for your lender and offers no coverage for you.
An owner’s policy, on the other hand, is the policy you purchase in your name, and will protect you.
Calculating The Cost Of Title Insurance
Unlike many other types of insurance which require that you pay a premium each month in order to maintain coverage, title insurance is a one-time cost. You pay a one-time fee and are then protected as long as you own the home and in some circumstances, beyond.
You may be able to secure a lower cost for your policy if you purchase the lender and owner policies at the same time. This is called a simultaneous issue rate. If you choose to refinance later, you will not need to pay for an owner’s policy again and in fact, may get lender policy discounts based upon the presence of an owner’s policy.
Your real estate agent will likely recommend a title service with whom they often work. However, you are under no obligation to use any one specific company.
Why Title Insurance Is Worth The Investment
Title insurance safeguards your home against the risk of significant financial loss, or even loss of the property itself. For example, if a family member granted the home to a relative through a will but the relative was unable to be located or thought deceased. Years later, the relative may appear after you have purchased the home.
Without title insurance, this person would be considered a legitimate heir to the property because of the will, which means that you would be at risk of losing the home. Title insurance safeguards your purchase against potential challenges such as this and will provide counsel and pay legal fees if necessary to defend your right to keep your home.
It will also shield you from liability if liens on the property are discovered after closing. This could include situations in which the previous owner hired a contractor to perform a service or other work on the home, and then did not pay for the services/materials rendered. The contractor would have then filed a lien with the county against the home. This means that when the home is sold, the outstanding balance due from the previous owner must be paid.
Trust The Experts To Help You Secure An Ideal Title Insurance Policy
If you are interested in learning more about title insurance or are ready to purchase an owner’s policy for your new home, be sure to work with trusted professionals. The experts at Mathis Title Company would be happy to answer any questions that you have. Contact our team to learn more or to schedule an appointment.