Title insurance is designed to protect both homeowners and lenders if questions or legal challenges arise over a property’s ownership. While it’s one of the many documents signed during a real estate
transaction, it can provide valuable protection long after closing. But what exactly does it protect against?

There are two types of title insurance: an owner’s policy and a lender’s policy. An owner’s policy protects you if a title or ownership issue surfaces after you purchase your home, covering the purchase price of the property as well as certain legal costs. A lender’s policy protects the mortgage lender, covering only the outstanding balance of the loan, with coverage decreasing as the mortgage is paid down.

Although not required by law, title insurance offers peace of mind for both homeowners and lenders. If a covered title issue arises, the policy can help pay legal expenses and cover financial losses. Understanding the most common title defects can help explain why this protection is so valuable.

Some problems stem from paperwork. Lost, forged or improperly recorded deeds can create uncertainty over who legally owns a property. Fraudulent documents claiming a mortgage has been paid off also can cause significant issues.

Financial obligations can create title defects as well. Mechanic’s liens, unpaid contractor bills, overdue homeowner association dues and unpaid property taxes can all become claims against a property. Mortgage or refinancing issues also may affect a clear title.

Another concern is encroachments, which occur when a structure crosses a property line. A fence, shed or even a swimming pool may extend onto a neighboring property without anyone realizing it. That’s one reason real estate attorneys often recommend a property survey before closing. If an encroachment was missed during the sale, the title insurance company may be responsible for helping resolve the issue.

To reduce these risks, attorneys typically hire a title company to research the property’s history. The company reviews decades of ownership records and legal documents to confirm the property was transferred properly and that no outstanding issues remain.

For example, if a couple owns a property and the husband passes away, the title company would look for a death certificate. That way, he wouldn’t come back to life and claim the property as his. The title company helps provide reassurance the property has transferred legally over the past 50 or 100 years.

The title company also checks mortgages and refinances to verify previous loans were fully satisfied. This extra step helps prevent an old lender or unpaid debt from creating problems when it’s time to sell the property in the future.

Buying a home is one of the biggest investments most people will ever make, and protecting that investment starts with making sure the title is clear. When the paperwork is complete and ownership has been thoroughly verified, the transfer process is smoother and everyone involved has greater confidence moving forward. An experienced real estate professional can help you navigate the process, answer your questions and make sure no important details are overlooked.

Kim Foemmel
Foemmel Fine Homes
1 Lumber Street, Suite 207C
Hopkinton, MA
(508) 808-1149
Kim.Foemmel@gmail.com
FoemmelFineHomes.com

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