When purchasing a property, and as part of the closing process, a title search is done to ensure the property title is clear. A title search will confirm the ownership and discover any possible liabilities.  This is done through a thorough examination of the property to identify claims by the government or creditors, outstanding tax liabilities, deed or use restrictions, easements, and construction liens.  An important part of a title search also includes looking for defective or missing documents that might make previous sales transactions invalid and bring ownership into question. 

Several different issues can prevent a title from passing to another party and if discovered after the sale of the property, can result in a major financial loss to the buyer.  Title insurance is the policy issued after a title search has found that the title is clear and before closing on the property and transferring the property to another owner. It protects buyers from losses by titles that are contested based upon past rights and claims asserted by others that occur after the property is purchased, or issues that may have been missed in a title search. 

Two Types of Title Insurance

One type of title insurance protects a lender and is known as a lender’s policy, and the other type of insurance protects the buyer and is referred to as an owner’s policy. In the case of a property purchased with a mortgage, any federally insured lender will require at least a lender’s policy. A lender’s policy will ensure the lender’s investment is protected should a claim against the property arise even years after closing on the property, and until the mortgage is paid in full. However, having a lender’s title insurance in place that protects the lender’s investment doesn’t mean the buyer is automatically protected. 

In many cases, an owner’s title insurance policy is something to consider based on the amount of buyer’s equity in the home, for protection if an issue comes up down the road, either before or after the mortgage is satisfied, or should the buyer pay all cash for the house. Keep in mind, if the buyer is not getting a mortgage, then a lender’s policy will not be required. If a dispute arises, failing to have a lender’s policy or an owner’s title insurance policy can result in claims or disputes against the buyer’s rights to own and use the house and could result in a major financial hit or even losing the property. Even if a buyer believes a title is free and clear, without a title search and title insurance, their investment is being put at unnecessary risk. Speak with an attorney about whether an owner’s policy in addition to, or in lieu of, a lender’s policy, is a good idea for your situation! 

Protect Your Property by Consulting with Staack, Simms & Reighard, PLLC 

Don’t cut corners when it comes to your property ownership. Whether you are an experienced real estate investor or buying your first home, purchase a title insurance policy to protect yourself and your property from any claims or potential disputes. It is a critical step towards ensuring your financial security and peace of mind after closing. Contact our real estate attorneys to ensure your transaction goes smoothly and that your hard-earned investment is safeguarded and enjoyed! 

Get experienced, professional, savvy, legal representation for your real estate needs. Reach out today. Staack, Simms & Reighard, PLLC