Title Insurance: a Worthy Investment?

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If you’re a boxer or MMA fighter, a shot at a championship is a life dream. But if you’re trying to buy or sell a home, a “Title Fight” is a nightmare you least want to experience.

What could possibly go wrong?

This question ranks right up there with “I saw this in a cartoon once, but I think I can get it to work” among famous last words.

When real estate changes hands, a lot of documents change hands and transactions take place. The list of things that could go wrong is extensive. The more times a property is sold or transferred, the more opportunity for “issues” to be introduced into the mix. Often enough, the paper trail doesn’t keep up with the transactions, even for new or moderately new homes.

Improper language or incorrect names in deeds, wills, and trusts; tax liens; fraud by previous owners or non-owners; judgments; easements; missing documents; unpaid prior mortgages; public record mistakes; and third-party rights to minerals, water, timber, and the like are just a few of the many problems that can derail a seemingly smooth property purchase or sale.

What to do, what to do?

Clare Schuller, Settlement Attorney at Progressive Title in Arnold, MD, notes that “the earlier you discover problems, the easier they are to take care of. Over time, problems only compound.”

"The earlier you discover problems, the easier they are to take care of"Unfortunately, these issues often don’t come to light until after, sometimes years after, the purchase is completed. A nasty—and likely costly—surprise!

Clare adds, “Without title insurance, the homeowner is then facing standard lawyer’s fees to clear up any title problems. That’s hundreds of dollars per hour, and they’re not always easy fixes.”

What is Title Insurance?

Simply put, title insurance protects homebuyers from title-related issues after settlement, issues that existed prior to settlement.

Title companies research a property’s ownership going back 60 years in preparation for settlement. But big problems could be lying in wait in the distant past or buried deeply in a home’s convoluted history.

A homeowner armed with a title insurance policy is covered against any past-ownership issues that might come up. It’s the responsibility of the policy’s issuer to resolve it.

OK, but at what cost?

Typically, title insurance costs a few dollars for every $1,ooo of the home’s selling price. For example, coverage for a home purchase of $250,000 can cost around $800. That cost is incorporated into the closing costs at the time of settlement.

If the previous owner also had title insurance at the time of sale, the purchaser receives a discounted “Reissue Rate.” That means that the buyer could get coverage on that $250,000 home for under $500.

Purchasing a home is one of the largest, if not the largest, investments you may ever make. Knowing that you’re safe from challenges to your ownership rights—a “title fight”—could make a small investment in title insurance a truly worthy investment.

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For more information

Consumer’s Guide to Title Insurance, Maryland Insurance Administration:         https://www.mdinsurance.state.md.us/sa/docs/documents/consumer/publicnew/titleinsurancebrochure.pdf

Progressive Title Website: http://www.progtitle.com/services/title-insurance/

 

NOTE: Progressive Title Corporation is not affiliated with Keller Williams Realty, Inc.

 

© 2015 The McDowell Team, Keller Williams Select Realtors

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