Our ANSTitle experts are here to discuss why title insurance is crucial for real estate closings and how different policies protect against unforeseen title claims. With decades of experience serving New York, we aim to educate buyers about the importance of clear titles and policy ownership.
How Title Insurance Works
Title insurance is designed to protect mortgage lenders and real estate buyers from financial losses. When a title insurance policy is issued, it guarantees the work of the agent and covers any costs that the current owner or lender may incur due to unexpected title claims. This one-time fee is typically included in closing costs and covers administrative fees and search activities.
Unlike other types of insurance that protect against future events, title insurance protects against past issues that may surface after the property purchase. This makes it an essential safeguard in any real estate transaction.
Types of Title Insurance
There are two main types of title insurance, each designed to protect different parties in a real estate transaction. Understanding the difference between these policies is crucial for both buyers and lenders.
Lender's Title Insurance
Lender's title insurance is mandatory for most mortgage loans. This policy is issued for the mortgage amount, paid by the buyer, and remains active for the duration of the loan or until the property is sold or refinanced. It protects the lender's financial interest in the property.
How Title Insurance Protects Lenders
If an owner defaults on their mortgage payments and another person makes claims towards the ownership of the property, the lender would have no way of recouping their investment without title insurance. The lender's title policy allows the mortgagee to recover the remaining balance owed on the mortgage, protecting the lender's financial stake in the transaction.
Owner's Title Insurance
Owner's title insurance is optional but highly recommended for buyers. This policy can be purchased by either the seller or the buyer, and it's often part of the seller's financial obligations. The policy remains active as long as the policyholder is the legal owner of the property, providing long-term protection for your investment.
How Title Insurance Protects Buyers
Title insurance protects the buyer from financial losses that may be caused by the discovery of title defects that already existed but were unknown at the time of purchase. In the event of a title defect discovery, the financial consequences can be devastating without an insurance policy in place. This could include loss of equity, legal fees, or even eviction if the title is found to be invalid.
Most Common Title Claims
Over the years, ANSTitle has encountered various title defects that can threaten property ownership. Here are the most common title claims we've seen:
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Unpaid Property Taxes:
Previous owners may have left unpaid property taxes that become the new owner's responsibility.
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Unknown Heirs:
Undisclosed heirs may come forward claiming ownership rights to the property.
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Incorrectly Recorded Property Deeds:
Errors in public records can create ownership disputes and legal complications.
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Property Survey Errors:
Incorrect property boundaries or survey mistakes can lead to disputes with neighbors.
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Forged Titles or Power of Attorney:
Fraudulent documents can invalidate property ownership, leaving buyers vulnerable.
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Liens from Contractors and Lenders:
Unpaid contractor bills or previous mortgages can create liens against the property.
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Conflicting Wills:
Multiple wills or estate disputes can create ownership challenges.
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Boundary Disputes:
Disagreements over property lines can result in costly legal battles.
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Building Code Violations:
Unresolved code violations from previous owners can become the new owner's problem.
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Undocumented Encroachments and Easements:
Unauthorized use of property or undocumented rights of way can affect ownership.
While this list covers the most common issues, it's not exhaustive. A proper title search conducted by experienced professionals is the best way to avoid bad real estate transactions and protect your investment.
What's Not Covered by the Title Insurance Policy
It's important to understand that title insurance only covers past issues and defects that existed before the policy was issued. It does not protect against future events such as failure to pay property taxes after ownership transfer, money owed to contractors for work done after you take ownership, or any new liens or encumbrances created after the policy date.
Purchasing Title Insurance
Title insurance can be purchased from any national or regional title insurance provider that services the state where the property is located. However, most real estate buyers are not aware that they have the option to shop around for an agent and oftentimes go with the provider suggested by their real estate broker or lawyer.
We encourage buyers to shop around for agents, compare pricing, and review reputations before making a decision. ANSTitle agents are licensed in 33 states and can handle closings across the U.S. Contact our experienced team for a quote and learn how we can protect your real estate investment with comprehensive title insurance coverage.
With decades of experience in New York and nationwide, ANSTitle is committed to providing exceptional service and protecting your property investment. Don't leave your real estate transaction to chance—ensure you have the proper title insurance coverage in place.