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Thursday, September 20, 2007

Do I Need Title Insurance When Buying a Home?

Whether you know it or not, when you purchase a home you are required to obtain title insurance. This insurance protects you and the lender against any errors on the title report. These errors can range from simple discrepancies in the record to major ones, where the seller may not even own the property you are purchasing.

Most homebuyers do not really get to compare and choose the type of title insurance they end up purchasing. Basically, the title company sells you an insurance policy when you close on the transaction. Since most homeowners simply use the title company recommended by their lender, real estate attorney, or real estate agent, in essence they are not offered a choice of title insurance.

This is all about to change, as the title insurance industry reacts to consumer complaints and government oversight. From the Inman News website:

Calling a GAO study that was critical of the way title insurance is marketed to consumers a "fair and thorough review," the American Land Title Association on Tuesday rolled out an industry plan to increase competition in the industry.

The industry has set up a website at homeclosing101.com to help educate homeowners on title insurance and facilitate choice. I briefly reviewed this website and found it to be very useful. Among other things it explains why you need title insurance, how the title search is performed and discrepancies the policy covers.

This website also has a real estate glossary, information on the closing process, and much more. If you’re a potential homeowner or a current homeowner, I suggest visiting this website and getting educated.

Shailesh & Aimee Ghimire of CTX Mortgage in Arizona - Your Mortgage Team for Life!Shailesh Ghimire
CTX Mortgage Co.
www.aimeeloans.com
www.azmortgageguru.com
(480) 516-1851 / (480) 516-1819
Email me

Posted by Shailesh Ghimire, AZ Mortgage Guru on September 20, 2007 | Permalink

Comments

Great article, Shailesh. Home buyers and sellers always have title and escrow questions! I'm frequently asked about the different types of title policies, so I'll add this:

There are 2 types of title insurance policies - the lenders policy and the owners policy.

The lender's policy is for the lender, and usually paid for by the buyer (but the buyer can negotiate to have the seller pay for it in the contract). The lender's policy protects the lender against title defects (up to the loan amount). If the buyer pays cash, you wouldn't need a lender's title policy, as it only protects the lender's investment. The cost of a lender's policy is usually based on the loan amount.

The owner's policy is usually paid for by the seller, but that's also usually negotiable. The owner's title policy protects the buyer against title problems once they own the property. You should NEVER buy a piece of real estate without getting an owner's title policy, even if you're told you're not required to buy it. The cost of the owner's policy will be based on the purchase price of the home.

Posted by: Shannon Hubbard | Sep 21, 2007 9:44:02 AM

I wanted to announce a real estate investment opportunity. The Town of Prescott Valley is auctioning 12,724 acre-feet of water during a two-day auction, Oct. 29-30. The auction is unique in that it has a $61-million-price-floor agreement with a resource investment firm. The auction will provide the primary source of water supply for new subdivision developments within the city. You can view more about the auction as www.waterexchange.com.

Posted by: Chris | Sep 26, 2007 3:10:46 PM

Yes I agreed. Most buyer simply take whatever their agent throws at them. Self education is important for buyers.

Posted by: John Power | Sep 27, 2007 9:47:16 PM

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