One of the more common questions we answer is “What is title insurance?” According to Investopedia, the definition of title insurance is:
“a type of indemnity insurance that protects
the lender and the homebuyer from financial loss
sustained from defects in a title to a property.”
Types of Title Insurance
There are 2 types of title insurance. The most common type is referred to as “lender’s title insurance”, which a borrower will purchase in order to protect the lender. The other type is referred to as “owner’s title insurance” which is typically paid for by the person selling the home in order to protect the equity of the home buyer. Here are some other key points to be aware of:
- A clear title ensures that a property is free from liens.
- Back taxes, conflicting wills, and liens are the most common claims filed against titles.
- One-time title insurance fees cover costly administrative fees for title data searches to protect against past claims.
- Title insurance policies cover several risks such as falsified documents, flawed records, incorrect ownership, etc.
A clear title is required for all real estate transactions. Furthermore, title companies do searches on every title prior to issuing them in order to check for claims and liens filed against them. This becomes important when you are looking to buy or sell a property.
What does Title Insurance cover?
Title insurance protects home buyers and lenders against damage or loss from defects in ownership, defects in a property’s title, encumbrances, and liens. Unlike traditional forms of insurance that protect you against future events, title insurance protects you against claims for what occurred in the past. The following hazards are covered in an owner’s title insurance policy:
- flawed records
- incorrect document signatures (including forgeries and fraud)
- ownership by other parties
- property encumbrances or judgments (e.g. lawsuits and liens)
- restricted covenants such as unrecorded easements (terms that reduce enjoyment or property value)
Some private transactions can involve what is known as a “warranty of title” in lieu of title insurance. This guarantees that the seller has the right to transfer ownership of the property to the buyer and that no one else has rights to that property.
The average cost of title insurance in California is roughly $550 and $150 to $250 for title search fees. Additionally, you can conduct the entire title search online which makes things a bit more convenient. Since the purchase of a home is one of the largest investments you’ll make in your lifetime, it’s important to work with a reputable mortgage company such as Granite West Funding. Call us today at 559-540-2275. Our business representatives are available to answer your questions and provide you with pertinent information.