A Look at Title Insurance and What It Covers
Real-estate investors know that title insurance is a critical part of investing in a piece of property. It is important to understand what title insurance is and how it can protect your interests as a real-estate investor. In this post, we’ll take a look at title insurance, what it covers, and how to evaluate whether it is right for your project.
What is Title Insurance?
Title insurance is a type of insurance policy that protects the owner of a property from loss or damage related to the title to the property. It helps protect the buyer from any potential liens, past taxes, or boundary disputes someone could have with the property.
In some cases, title insurance covers both the buyer and the lender. The lender’s policy, or lender’s title insurance, pays the lender for any losses they suffered due to a title problem. The buyer’s policy, or owner’s title insurance, pays the buyer for any losses they suffer due to a title problem.
What Does Title Insurance Cover?
Title insurance covers a variety of title-related issues. It can cover issues such as:
- Unpaid taxes
- Undiscovered legal heirs
- Errors in the public records
- Forgery
- Misunderstandings of the legal description of the property
- Unsatisfied contracts or liens
- Fraud
- Restrictive covenants
Title insurance might also cover additional items, depending on the policy.
How Does Title Insurance Work?
When a real-estate investor purchases a property, the title company handles the sale process. This includes searching and examining the public records to make sure there aren’t any outstanding title problems. If a title issue is discovered, and it is covered by the title insurance policy, then the title company will handle the issue on behalf of the investor.
Evaluating Title Insurance
When evaluating title insurance, it is important to look at the coverage offered by the policy. Not all title insurance policies are the same, so make sure that you understand what is and is not covered by the policy.
It is also important to understand the cost of the policy. In most cases, the cost of the title policy is paid upfront when you purchase the property. However, some lenders may require the cost of the title insurance to be paid over time. In this case, make sure to understand the full cost of the title insurance policy.
Finally, make sure to understand how long the policy lasts. Most title insurance policies only last for as long as the current owner is occupying the property. When the owner no longer lives in the property, the policy may become invalid.
Conclusion
Title insurance is an important part of protecting your interests as a real-estate investor. Make sure to do your research when evaluating title insurance and understand what the policy covers and how long it lasts. Doing so will help you make an informed decision when purchasing a property.