The home-buying process can feel very complicated, with lots of paperwork to sign and documents to read. Buyers may be surprised by added and unexpected fees at closing, if they are not prepared.
Title insurance is one of those fees that many buyers may not understand; they may perceive it as an unnecessary cost associated with buying a home. As a Realtor, your clients should trust you as an advisor; you can help them understand the value of title insurance, and the risks they take without it.
Title insurance protects the buyers against issues with the title to a home, which is likely your client’s most valuable asset. Title insurance takes two forms. Loan policies are almost always required by the lender and insure the title for the amount of the mortgage. An Owner’s Policy, conversely, insures the homeowner’s investment (down payment, equity, etc.) Buyers need both kinds of insurance.
Title companies do exhaustive due diligence prior to closing, specifically to reduce the chance that homebuyers will incur a problem with a title. Historically, the title insurance industry has rarely had to pay a large amount in claims. Because title professionals do corrective work during the process, many buyers are unaware of minor issues that may have arisen, and the closing goes smoothly. Few title problems ever result in a claim. However, in the rare cases when an issue does come up, not having the proper protection can devastate a homeowner, and have a heavy impact on their financial situation.
Title problems can include prior tax liens or liens from an unpaid subcontractors, forgeries in the chain of title, recording errors, or title claims by missing heirs or ex-spouses. Having both a Loan Policy and Owner’s Policy ensures that your clients are fully protected, no matter what occurs.
I hope you found the article useful. Give me a call if you have any questions.