When buying or selling a home, finding out that you may have to put more money towards the transaction can be frustrating. However, when it comes to title insurance, the moderate investment is worth the cost. An owner’s title insurance policy is a buyer’s best protection against possible defects in property ownership that could remain hidden even after a thorough public record search. While most lenders require buyers to purchase a lender’s title insurance policy to protect the amount lent to you, an owner’s title insurance policy is usually optional. Learn who typically pays for title insurance and how you can acquire a policy when purchasing a home.
What Is Owner’s Title Insurance?
Unlike a lender’s title policy which protects your lender in the event of a property title mishap, owner’s title insurance is designed to protect the homebuyer. When you buy a home, you receive a deed which shows the transfer of property from the seller to the buyer. To ensure that this process is accomplished properly, a real estate agent or title insurance company will usually step in to search public records and determine if there are any problems.
While this process is usually successful, sometimes an issue is missed and the buyer unknowingly closes on the home. Later on, someone can make a claim against the house and you could be sued. While there are many scenarios that could lead to a lawsuit, some examples include previous owners who failed to pay their taxes or home contractors who performed extensive work on the property and were never paid for their work. When this type of situation arises, you are going to want to have title insurance.
How Does Owner’s Title Insurance Work?
Title insurance coverage can range depending on what type of policy you choose. Most title insurance companies offer several types of policies, such as standard policies and extended coverage policies. With a standard title insurance policy, you can remain protected from certain types of risks like forgery, impersonation, deed not properly recorded, lack of a right to access, and a lack of competency. It may also cover any undisclosed but recorded prior mortgages, liens, easements, or use restrictions. Most of these policies also cover legal descriptions that were inadequately written but had gone unnoticed prior to the sale of the property.
If you invest in an extended title insurance coverage policy, you usually get many of the same perks as the standard policy but more. In addition to the coverage options listed above, you may also be protected against post-policy forgery, post-policy construction or improvements by a neighbor on your insured land, and forced removal of certain improvements due to a lack of a building permit. While these are some of the most common types of coverage, exact coverage options can range based on where you acquire your owner’s title insurance policy.
Who Usually Pays for Title Insurance?
So, who pays for title insurance? As a general rule of thumb, the homebuyer is responsible for purchasing both lender’s title insurance and owner’s title insurance. This expense can range from between $150 to $1,000 or more depending on the amount of coverage you want. Of course, there are no laws that mandate that buyers must pay for the cost of owner’s title insurance. In fact, negotiations can sometimes result in the seller of the home actually paying for title insurance on behalf of the buyer. This type of negotiation may occur if a seller is looking to sell the property fast and is therefore willing to take on more of the closing cost expenses to seal the deal.
Other factors can also influence who pays for the title insurance policy. For example, if a homebuyer is looking to purchase a home located in a seller’s market, there is a high probability that the buyer will be responsible for the title policy payment. In addition, if a buyer purchases a new construction sold by the builder, the builder will often pass the title coverage fee onto the buyer. If a buyer and seller are undergoing friendly negotiations, they may also come to an agreement that says that each party pays 50-percent of the owner’s policy expense.
Learn More About Title Insurance
Your home will no doubt be one of the biggest investments you will ever make in your lifetime. As such, you do not want to put it at risk by skimping on owner’s title insurance. In the same way that you would purchase homeowner’s insurance to protect your house against loss from theft of fire, you should also consider owner’s title insurance to protect against the unknown dangers that could result from a title issue down the road. For more information about owner’s title insurance or to acquire a policy, contact Mathis Title Company today.