The purchase of title insurance policy of the lender has become a crucial and important part of the mortgage process. It is always a good thing to buy a little coverage as a homeowner. Your property needs to be protected by a title insurance policy at all times to save you the trouble of dealing with different problems that occurred in the past with the property. Title insurance also cover various legal costs and implications that the property has to suffer due to the wrongdoings of the previous owners.
Title insurance policy protects you:
• From the previous easements and liens which have gone unreported on the property
• From the forgery in transfers of ownership rights to the rightful owner
• From the errors which occur unintentionally in the filing of the documents or recording them
• From the title defects that existed before you opted the title insurance policy
It has been noticed that the claim of the rightful owners of the property has been relatively less in the past years, but the open-ended nature of the land recording system that is prevalent in the United States of America allows for a number of scenarios where Title insurance policy can save you thousands if not millions in the form of legal fees. A defective title can be a very likely possibility if you are purchasing a distressed or foreclosed property. But in this case, the title insurance policy can help you save a fortune in compensating for your loss.
Title- what are the possible problems?
Several problems can arise when you purchase a property that had a troubled past. It is very likely a possibility that the previous owners have misconducted and committed fraudulent acts against the property. This includes forged documents, such as those which transferred no title to the property, forged satisfactions or forged mortgages and their releases, fraudulent persons personifying as the true owners of the property to sell it, fabricated power of attorney and others. In addition to all this, there can be other circumstances as well, for example, the deed may be obtained by someone who remarried before getting the divorce and has inherited the property as spouse of the person whom they divorced, or the owner forgetting that he has already sold the property to a new owner and cannot resell it to the buyer. Or perhaps, there is a perfectly good title that you acquired, but there is no legal access to the property.
Other problems include the execution of the deed by a minor who is not competent enough to sell the property, public record mistakes in the record of the property, mistakes in the names or spellings of the name, indexes, and failure in the preservation of original documents of the property. Defective acknowledgment of the authority of notary, inadequate descriptions, erroneous location or a sewer line or pipe which follows an unidentified route which was not part of the granted ease, erroneous, invalid and suppressed interpretations of the walls of the property, undisclosed heirs that were previously unknown of the property, irregular proceedings of taxes, unpaid estate liens, and many others.
The title insurance policy can effectively address all these problems and give the new owner a sense of comfort to be protected from any malicious act against the new owner due to the history of the property.
Title insurance- what does it cost?
Although it is optional, the title insurance of the owner is usually more expensive. You can expect to pay anywhere from $1000 to $2000 for the owners policy. Some of the things which increase the insurance costs include the larger loan amounts, lower credit scores, smaller down payments and others. Having owner insurance is optional, but the policy can go a long way even after you sell the property as it protects your rights as the owner of the property and helps save you from any legal trouble caused by the previous owners of the property and the new owners in case you are selling the property.
You can't negotiate with your lender and seller on the costs of title insurance policy.