For many first-time home buyers, navigating the complexities and risks of investing in real estate can be daunting. Buying a home may be the most significant financial transaction of your life, and the prospect of hidden title defects impacting your investment is a terrifying one. Thankfully, there are steps you can take to protect yourself. Purchasing comprehensive title insurance is the key to your peace of mind.
What Is Title?
Before we unpack the importance of title insurance, it is necessary to explain what title is. If someone has title of a property, it means they legally own that property. In Florida property law, ‘ownership’ is construed as a bundle of rights – for example, the rights to use, possess, modify and dispose of the property, as the owner wishes.
Many people confuse the term ‘title’ with the term ‘deed’. However, while title is an abstract concept, ‘deed’ refers to the actual legal document that gives someone title to the property. During closing, the seller must sign the deed to finally settle the real estate transaction. The deed will, among other things, include a general warranty which states that no one except the buyer – the new owner – has ownership rights over the property.
What Are The Hidden Title Hazards That Make Title Insurance Necessary?
Having clear title to a property is the crux of any real estate investment – you can buy the most valuable property in the state, but if your title turns out to be flawed in some way, meaning that you don’t have the right to possess or dispose of the property, your investment is effectively worthless. A ‘title defect’ or ‘title hazard’ is something that impacts the validity of the buyer’s legal ownership of the property. For example, if it turns out that the seller did not actually have the right to transfer ownership in the property because it was subject to an undisclosed mortgage, then the purchaser’s title may be defective.
Similarly, if the signature on the deed was forged, or an unknown heir of the previous owner comes out of the woodwork claiming ownership of the property, the purchaser’s title may be defective. These title hazards can result in the entire real estate transaction falling apart, at enormous cost to the purchaser.
Why Is Title Insurance Important?
When you purchase a home, your real estate attorney or title company will conduct due diligence on the property. This means that they will carefully scrutinize the chain of title and recorded history of the property to confirm there are no liens, encumbrances, undisclosed mortgages, outstanding property taxes or other issues that would impact your title to the property as purchaser.
However, even the most diligent search may not uncover hidden title hazards, and certain title hazards – such as forgery or missing heirs – are very difficult to detect. This is why title insurance is so important: it protects you, as the purchaser, in the event that any title defects or hazards are discovered down the line.
What Is Title Insurance?
In essence, title insurance provides you with blanket protection against a whole range of possible title issues that may arise after purchasing a property. The cost of title insurance will depend on the value of the property and the extent of the cover provided. It’s important to note that, rather than being a monthly expense, title insurance is paid for as an upfront, one-time premium which provides you with cover for as long as you own the property.
Usually, title insurance will include cover for your legal costs in the event that you have to defend any claims to competing title (brought by, for example, a previously unknown heir). In the worst case scenario – where a competing title claim is successful and you lose the property – your title insurance policy will usually entitle you to claim the purchase price paid for the property from your insurer.
What Is The Role Of A Title Insurance Company?
A title insurance company will first conduct a thorough title search to determine whether the seller has clear title to the property or whether there are any liens, mortgages, easements or encumbrances over the property. Once the title search has been completed and no defects in the title have been uncovered, a title insurance policy will be prepared and you will be issued with title insurance. Title insurance companies can also play a role in closing real estate transactions, in lieu of a real estate attorney.
What To Look Out For When Choosing A Home Title Company
While many first-time home buyers think of title insurance as optional, this is a mistake. Title insurance provides you with vital cover that protects what is likely to be one of the biggest investments of your life. It is critical that you choose a reliable and trustworthy title insurance company. Your insurance provider should have years of experience in the industry and a proven track record of diligence and attention-to-detail. You want to be sure that the company will conduct thorough title searches, will help facilitate your real estate transaction so that it can be settled smoothly and quickly, and will clearly and patiently explain the title insurance process to you.
If you are building a property portfolio and looking to expand your investments, it is also a good idea to choose a title insurance company which has expertise in a range of real estate transactions, from commercial and residential to construction and land transactions. You should also confirm that the company is fully licensed to practice across the state of Florida.
A Florida Home Title Company You Can Trust
It is an added advantage if your home title company is affiliated with or owned by a law firm with real estate expertise. This is why the Florida Home Title Company, owned and operated by the Law Offices of Gary I. Handin, P.A., combines the best of both worlds. Even though the Florida Home Title Company does not act as your lawyer, it nevertheless provides you with the diligent, reliable level of service that you would expect from a law firm, because it is operated by our team of reputable lawyers and support staff. And, in the event that legal issues do arise, Gary I. Handin and his team of professionals are on hand to resolve them. To find out more about our real estate services and the Florida Home Title Company, give us a call at 1-877-815-4560.