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 When purchasing real
estate you want to be sure the Title is clear of any encumbrances. Your
attorney or escrow company normally takes care of this through providing
a Title Search and a Certificate of Clear Title. However, even though
the Title Search reveals no issues with the title there can still be
problems that surface after the sale. These problems can be expensive or
impossible to resolve.
Title insurance was introduced to insure a buyer against defects in
the Title of property they are purchasing. Although a lender may require
Title insurance, this is typically only to cover the value of the loan
on a property. The Buyer has the option of extending the insurance
through a one-time payment to cover the balance of the equity in the
property. Title insurance comes in two forms, basic and extended. You
may want to opt for extended coverage.
Although very few Title issues arise after a sale, not taking the
additional insurance can be very expensive.
Take the owner who purchased a home with a pool that was encroaching
upon a neighbors yard. The attorney for the buyer missed this in the
survey report and the sale went ahead. Fifteen years later, the owners
decide to sell and the new buyers discover the fault in the Title just
prior to closing. The sellers now have to fix the problem at their own
expense because they had not purchased extended Title insurance when
they purchased the property. (This is a necessary simplification of a
longer story).
Attorneys usually receive a commission from Title Companies for
selling the insurance so you could ask your attorney to refund the
commission to you.
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