Each year, approximately 20% of homebuyers fail to protect themselves by not getting owner’s title insurance. Unfortunately, this leaves them exposed to serious financial risk—causing endless worry and regret.
If you’re thinking of buying a home, here’s what you need to know to protect yourself and your property rights, so you can rest assured once you’ve purchased your home.
Looking For Potential Threats
During the home-closing process, your title professional will help transition the home from the seller to you, the homebuyer, by examining public records. Generally, if a problem is discovered, the title professional works to resolve them before you purchase the home.
However, even after a title search is performed and you purchase your home, problems could arise that threaten your ownership rights. Examples include:
- Undiscovered tax liens
- Forged signatures in the chain of title
- Recording errors
- Undisclosed easements
- Title claims by missing heirs* or ex-spouses
Getting owner’s title insurance protects your property rights from threats like these. Here’s a real-life example of how it works.
A family in Missouri unknowingly purchased their home from a seller who had taken out a separate $419,000 loan on the property. But this fact was not discovered during the closing process, and the family’s lender paid the seller directly instead of paying off the existing loan.
Soon, the family faced foreclosure because someone else had claim against their title. Fortunately, the family had owner’s title insurance. So the title company paid the debt and the family kept their home—and peace of mind.
This story has a positive ending, but without owner’s title insurance, the family could have faced serious costs, and even eviction.
There are two types of title insurance: lender’s title insurance and owner’s title insurance.
Lender’s title insurance is required by most lenders and banks because it protects their loan investments. Usually, you purchase this policy as the homebuyer. If you only have a lender’s policy, where the outstanding loan is covered, your equity is not protected. Therefore, you could have your property rights taken away if someone else has claim to your home.
Owner’s title insurance is the policy that protects your property rights from legal and financial threats like those mentioned in the story you just read. That’s why millions of homebuyers each year make the smart decision to get owner’s title insurance. It’s a low, one-time fee that provides the peace of mind that every homebuyer deserves, for as long as you or your family* own your home.
*This advertising offers a brief description of insurance coverages, products and services and is meant for informational purposes only. Actual coverages may vary by state, company or locality. You may not be eligible for all of the insurance products, coverages or services described in this advertising. For exact terms, conditions, exclusions, and limitations, please contact a title insurance company authorized to do business in your location.
Make sure all of your clients are protected
You’re a real estate agent, so you know that buying a home can be overwhelming for many of your clients. Homebuyers can easily feel confused and frustrated by the mounds of paperwork they have to sign. Plus, all the fees associated with closing can sometimes be a surprise even to an experienced buyer.
Owner’s title insurance is one of those items often misunderstood by homebuyers at closing, yet its value is tremendous. As an important advisor to your clients, you are in the position to help them understand the value of owner’s title insurance and the dangers that can be incurred without it.
What is title insurance?
Owner’s title insurance is a policy that protects homebuyers’ property rights. For the same reasons that the bank requires a lender’s insurance policy, a homebuyer obtains owner’s title insurance to protect their legal claims to the property.
How it protects your clients
Say, for example, your client recently purchased a new home from a builder, but the builder failed to pay the roofer. Wanting to be paid, the roofer filed a lien against the property. Without owner’s title insurance, your client would be responsible for paying this existing debt—meaning they’d be paying the roofer out of pocket instead of purchasing something nice for their new home, like new living room furniture. This is just one example of how owner’s title insurance protects homebuyers’ from various significant risks. With owner’s title insurance, your client would be protected from certain legal or financial responsibilities.
The good news is that owner’s title insurance protects homebuyers financially, as long as they or their heirs* own the home. For a low, one-time fee (average of 0.5% of purchase price), homebuyers can rest assured, knowing they are protected from inheriting existing debts or claims to their property.
State regulations and CFPB
Each state government regulates its own title insurance costs. In addition, the Consumer Financial Protection Bureau (CFPB) regulates closing and settlement practices which can impact title insurance. Keep in mind that title insurance industry practices vary due to differences in state laws and local real estate