First, let’s define Title Insurance. Title Insurance is a policy that protects property owners and lenders from financial loss due to defects in a property’s title. These defects could include undisclosed heirs, outstanding liens, or errors in public records. Title insurance ensures that the buyer or lender has a clear and marketable title, providing peace of mind and protection against potential legal issues. It is important because it helps safeguard real estate transactions by mitigating risks associated with unclear or disputed property ownership, potentially saving parties from significant financial losses and legal complications. Sounds important to me!
When you buy any real estate, you assume that you are the legal owner of said property. Poor or unfinished legal work, mishandled estates, or outright fraud can create situations whereby the “new owner” of the property doesn’t have clear, legal ownership of the property. Title Insurance is a policy that insures against any claims that turn out to have legal claim to your new property. The buyer of the real estate has the opportunity to buy the policy at the closing of the transaction. The lender also has a policy that is paid for at closing if there is a loan being taken out on the property. Claims on title are not what we would consider “common” but the cost of settling a claim tends to be expensive.
Consider the following real-life example of a situation in St. Simons. A family bought a house and property nearly 18 years ago from a guy that recently lost his wife. A title search was done and the house was transferred to the buyers. Years go by and now they are ready to sell the home. Once the home is under contract a title search is done on the home. Turns out, the original seller didn’t own the house completely. Since he and his wife took the original title as tenants in common, when the wife died, her portion of the house automatically went to the kids. The original attorney didn’t catch it during the first sale. That means that technically the four kids owned half of this house and property. AND they were not cooperative on settling on a value to resolve the issue. The new attorney was able to dig up the old title insurance policy that was bought at the original sale and they negotiated a settlement for the mistake. The Title Insurance paid the settlement, which was a lot of money. This issued delayed closing SEVERAL months.
All that considered, BUY THE TITLE INSURANCE.
