Title Insurance: Protecting Yourself and Your Home

By Michael Maddiex, President, Long & Foster Settlement Services.

Aug 201612

Title Insurance: Protecting Yourself and Your Home

By Michael Maddiex, President, Long & Foster Settlement Services.

Why is title insurance important?

So you’ve found your new home, your offer has been accepted, you’ve had it appraised, received your mortgage approval and all is clear for your settlement.  Congratulations – you are almost there!  But there is one more important item to consider at settlement to safeguard your large investment – Title Insurance.  It provides protection for you and the lender from the possibility that the seller, or previous sellers, did not have clear title to the property and can’t correctly pass the property on to you. Once your purchase contract is ratified, the title company will search the local title records to determine the property’s “chain of title.” Specifically, they closely examine title documents to determine insurability, checking any issues that must be resolved before the property can be sold. These can include paid but unreleased mortgages, judgments outstanding against people with similar names, estate/will claims and mechanic’s liens (a previous owner failing to pay for work done on the home). Although a title search is performed and analyzed by the title company, unforeseen defects in the title can appear later. A title insurance company insures against losses resulting from covered title defects. For example, the seller may have purchased the house from a single woman, not realizing that her ex-husband, who was a co-owner of the home, did not sign off on the sale as required.  The ex-husband could later place a legal claim on the rights to the property.  Owning a title insurance policy will cover the costs and fees associated with defending the claim.

What could happen without title insurance?

The risks of not having title insurance can be compared to the risks of not having health insurance. Imagine that to get health insurance, you must first go to a doctor for a check-up.   The doctor gives you a clean bill of health so you decide not to purchase health insurance.   Being healthy now doesn’t ensure you’re going to stay healthy.  Health insurance would cover you if future health issues arise and similarly owner’s title insurance would cover you if any future title defects arise.  Just because a title search was completed does not mean title problems couldn’t potentially surface in the future. Without title insurance, you could be faced with significant legal fees, costs, and even the loss of all, or a portion of your land or home. If you have questions about or are in need of title insurance, feel free to contact one of our title partners. When you work with the Long & Foster Settlement Services team, you can rest assured your closing will go smoothly and your investment will be well protected.