There are many things that take place in a real estate transaction between the time you sign a contract and the time of the closing. Inspections, appraisals, lender approval, and more. And for the entire thing to go smoothly, a title search will be performed.
A title search is a thorough review of the property - as far back as its records go. And its purpose is to ensure that there are no defects in the title that could lead to issues for you, the new buyer. A home purchase may be the biggest investment you will ever make and you want to make sure you are eliminating as many risks as possible.
A title insurance policy can help to protect against title issues.
Understanding Title Insurance
A title search is done to check out the chain of title to the property and look for any issues that may pose a threat, such as outstanding taxes or questionable transfers. A title policy will be issued that will deem the property free and clear of any encumbrances or it will state any conditions that need to be met before title insurance can be issued.
So, what is title insurance?
Much like homeowners insurance protects your property itself, title insurance protects your rights to the property. The title search makes sure that the seller has the right to sell and that there are no outstanding title issues, but there is always a chance for error. Something could have been missed and this can put your property rights at risk.
The most common title defects include:
Outstanding mortgages
Liens
Judgments
Wills/inheritances
Foreclosure
Fraudulent or forged documents
Erroneous recordings
Bankruptcies
Easements
Encroachments
Regardless of how thorough a title search is, there is a chance for a title defect to arise in the future. You as an owner have the right to purchase an owner’s title insurance policy to protect your rights for as long as you have an interest in the property. But this won’t protect the lender.
What is Lender’s Title Insurance?
You are taking a risk buying your property, but your lender is the one putting up the funds for you to do so. And that makes their risk in the purchase quite significant. To protect themselves, many lenders will require that you purchase a lender’s title insurance policy. This policy is different from an owner’s policy and it will not protect your rights to the property.
Lenders want to minimize their risk. They want to be protected should something go awry with this transaction, from now until the mortgage is satisfied. And they want to make sure that their loan is first in line to be paid should the home go into foreclosure, get sold, etc. A lender’s title insurance will protect the lender and their loan until it is satisfied.
It is not uncommon for lenders to make purchasing this title policy a condition of the loan.
Learn More About Lender’s Title Insurance
There is a lot to learn about lender’s title insurance - and title insurance, in general. And there is no better team to guide you than the experts at Endeavor Title Company.
Contact us today at (410) 666-3780.
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