If you’re in the process of buying your first home, you’re probably learning just how many unexpected costs and fees real estate transactions involve. From attorneys’ bills to loan origination fees, appraisal fees, and more, the costs of closing a real estate transaction can quickly run into thousands of dollars. It may therefore be tempting to cut out those expenses that appear to be ‘optional extras’, such as title insurance. However, while purchasing title insurance may be optional in Florida, it is the last thing you should be compromising on – even when your budget is tight.
What Is Title Insurance?
Of all the hidden closing costs and fees, title insurance is probably the most valuable to you as the buyer. In a nutshell, title insurance insures the owner of a property against loss arising from any title defects, encumbrances, liens, and other legal claims against the property that only come to light after closing (these are also known as ‘title hazards’). In other words, if anything goes wrong in your real estate transaction after closing, you as the buyer will be protected from any loss that you suffer as a result.
Understanding The Risk That Title Hazards Present
One reason why many homebuyers don’t appreciate the importance of title insurance is that they don’t fully understand the risk that title hazards present. To have a clear ‘title’ to a property means that you have ownership rights over the property. It is your title to a property that gives you the legal power to possess it, make alterations to it, use it as collateral, lease it, sell it, and otherwise deal with it as you wish. If it turns out that your title is in some way defective, then, regardless of the market value of your home, your real estate investment will come to naught.
So, what are the hidden ‘title hazards’ that could impact your real estate investment in this way? One possible title hazard is an undisclosed lien. If it turns out that the property is subject to a lien that the seller failed to disclose, then the transfer of ownership of the property from the seller to you could be invalid. Another title hazard is a forged signature on the title deed or a fabricated power of attorney authorizing the seller’s agent to sign the deed. If the seller’s signature on the deed turns out to be forged, or the signatory’s power of attorney is discovered to be fake (or has simply expired), the transfer of ownership will be invalid. Unpaid property taxes and utilities are other potential title hazards. Even small clerical errors in public records relating to the property could negatively impact your title.
How Title Insurance Protects You
While your real estate attorney or title company will conduct a thorough due diligence and carefully scrutinize the seller’s title deed before you close your real estate transaction, some title hazards cannot be discovered with even the most comprehensive public record searches and document review. If a title defect emerges after your real estate transaction closes, the impact could be financially disastrous. Imagine finding out that you are liable for years of unpaid property taxes on your home, or worse, that you are not the legal owner of your home after all because an unknown heir has made a claim to the property?
Thankfully, with a title insurance policy behind you, you will be covered against these risks. Depending on the coverage of your policy, you will be covered for the legal fees you incur to defend your title to the property, and for any legally valid claims you are required to settle in order to retain your title (for example, unpaid property taxes). If the worst possible outcome occurs and you lose your home to a competing title claim, your insurance policy will usually entitle you to claim the purchase price you paid for it from your insurer.
Two Types of Title Insurance
There are two types of title insurance out there: lender’s insurance and owner’s insurance. Most banks will require you to obtain lender’s insurance as a condition to granting you a mortgage, and it protects their security interest in the property. Owner’s insurance, on the other hand, protects you as the owner from any adverse financial consequences should a flaw in your title come to light – whether that be the expenses of your legal defense, or the loss you suffer if the competing claim is valid.
Common Misconceptions About Title Insurance
For an investment as significant as purchasing a home, title insurance is not something you want to sacrifice. Yet many people do because they have misunderstood how title insurance works. Firstly, it is crucial to understand that title insurance, unlike other insurance premiums, is a one-time payment rather than a recurring monthly expense. As the buyer, you will only pay for title insurance once (when you purchase the home), and it will insure you for as long as you (or your heirs) remain the owner of your home.
Secondly, many people tend to think that title insurance is prohibitively expensive when it is very affordable. As any person who works in the real estate sector will tell you, if you can afford to buy a home, you can afford to buy title insurance. The cost of title insurance is calculated depending on the value of the property and the extent of coverage you choose to purchase.
A Reputable Florida Home Title Insurer
Navigating the legal and financial complexities of purchasing your first home can be daunting. Taking out comprehensive title insurance is the best way to give yourself peace of mind that your precious investment will be protected – and you’ll have even more peace of mind if you choose to work with a reliable and reputable title insurance company.
Florida Home Title Company has a proven track record of excellent client service and meticulous attention to detail. Owned and operated by Attorney Gary I. Handin, the team at the Florida Home Title Company is qualified to assist you with everything from conducting thorough title searches, advising you on the coverage available, preparing policy documents, and acting as your closing agent.
Give us a call at 1-877-815-4560 and we’d be happy to assist you with any queries you have about obtaining title insurance for your real estate transaction.