Understanding Title Insurance

Being in escrow can be overwhelming for many buyers. Pages and pages of documents flood their inbox and mailbox. A good majority of this they rely on their agent or escrow officer to advise on and highlight where a signature is needed. When it comes to the owner’s title insurance policy, they may not understand the importance of it.

As agents we understand that a buyer’s title insurance policy protects their rights to the properties for the years to come, but as a buyer you should know more.

• Title is a buyer’s ownership of the property and should be clear of any and all clouds on that title in order to transfer the property, refinance, etc.

• Before closing escrow, your title company searches public records to ensure there are no outstanding liens or encumbrances that may be clouding title. However, sometimes unexpected issues arise after a search is completed. An example of this would be a previous owner of the property never paid a contractor and that contractor, now sick of waiting for payment, files a mechanics lien against the property after the initial search was done. Having a title insurance policy protects a buyer’s rights to the property in these rare instances. In some cases, this could even include providing legal defense.

• Lenders require title insurance. Most buyers are not purchasing in cash and therefore are required by their lender to obtain a title insurance policy to protect their loan against any such claims.

• In short, the one time fee for title insurance paid at the close of escrow as part of a buyer’s closing costs protects the buyer from a wide array of problems that could arise. This policy will continue to protect them and their heirs as long as they own the property.