Purchasers of real property are offered the opportunity to purchase an Owner's Title Insurance Policy at the time of closing; it is a highly recommended optional coverage that protects a purchaser's investment. You do not have to buy the Owner's Title Policy from the closing attorney, but if issued simultaneously with the Lender's Title Insurance Policy is discount is offered on the premium. An Owner's Title Insurance Policy protects a purchaser against financial loss from claims against the property due to an unforeseen or undisclosed defect in title to the property. Matters covered by an Owner's Title Policy include forged deeds, unsatisfied mortgages, improper foreclosures and claims of lien.
Redmond Law, LLC has a thorough title examination performed at the courthouse, as a part of every transaction. The title examination reveals the chain of title (ownership history of the property) and will set out any problems or defects discovered in real estate records. However, there are a number of defects that will not be revealed even in the most thorough of title examinations. Several examples are:
While an Owner's Title Insurance Policy does not guarantee there are no defects or clouds on title; it does cover attorney fees to fight claims of title and provides relief from financial loss due to undisclosed defects. When deciding to purchase an Owner's Title Insurance Policy a purchaser should also consider the following:
A Lender's Title Insurance Policy does not protect the purchaser against title claims. The lender's coverage is only available to the lender in the event of a borrower's default. The title insurance company will pay a claim to the lender, if after retention (such as foreclosure) a defect is discovered in title
In the case of new construction, it is important to understand a claim of interest in the land jeopardizes the improvements as well. So while the house is new, the land has been transferred for decades and is subject to title claims.
Materialman's Liens filed during and after the construction of property improvements are liens against the real property, not just against the builder. The Enhanced Owner's Title Insurance Policy provides coverage for undisclosed materialman's lien filed against prior owners.
There are errors, mis-indexed documents and other hidden defects in the courthouse records that would not be discovered, even by a diligent title examination. An Owner's Title Insurance Policy provides coverage for such hidden defects.
Even if the purchaser has very little equity in the home, a claim to title can be very costly to defend. Owner's Title Insurance covers the legal expenses of defending a claim and financial loss incurred if the claim was successful.
Upon a successful claim of title, without an Owner's Title Insurance Policy, a purchaser can lose their home, any equity, and they would remain personally responsible for paying back the mortgage on the property.
There is a one-time premium for the Owner's Title Insurance Policy, it is collected at the time of closing. All lenders require Lender's Title Insurance Policies; a prudent purchaser is wise to purchase this coverage to protect their interest in the property. Unlike other insurance, it is paid only once for coverage during and after ownership; like other insurance, if needed, it is well worth the low premium paid to purchase the Policy.