As a realtor, you are a trusted navigator for your client, the homebuyer, steering them through the often rough and rocky path to home ownership. As you move toward the closing table, your buyers may have a lot of questions about the requirements for securing mortgage loan approval and getting through the pile of documents that stand between them and the front door of their new home.
One thing that confuses many buyers is the need for the added expense of title insurance. They may ask you to help them decide if they should to purchase an owner’s policy that protects their interests in the property. While many people do not understand title insurance, as their real estate professional, you are uniquely poised to help them understand why it is one of the most important decisions a homebuyer will make in regards to their real estate purchase.
As your buyer will most likely be receiving a mortgage loan, the lender will require them to purchase a lender’s policy of title insurance, in order to protect the lender against any issues or problems that may arise to affect the rights to ownership of the home. Because lenders are experienced and sophisticated real estate investors, and they understand the necessity of title insurance that protects their interest in the property.
Unfortunately, even though the buyer must pay to purchase the lender’s title insurance, they need to understand that this policy protects only the lender and offers no coverage for them as the new homeowners. As their guide through the process, you can do them a service by explaining this and that at closing, they will be given the opportunity to purchase owner’s title insurance as well. This coverage does protect them and their heirs, for as long as they have an interest in the property. The coverage will also extend if they convert the property to an estate planning trust in the future.
A recent court case highlights the importance of title insurance. In Massachusetts the Supreme Judicial Court upheld a lower court decision that effectively invalidated thousands of titles in Massachusetts. Although the court’s ruling was complicated, the bottom line was that titles to certain properties in the state that were subject to foreclosure are rendered invalid if the foreclosing lender did not possess an assignment of the mortgage in advance of the foreclosure notice being published in the newspaper.
As a result, someone who purchased a property in 2010 which was incorrectly foreclosed upon 25 years earlier does not legally own the property now. If that person did not buy an owner’s policy of title insurance when they closed, they would not be able to sell the property, and their options are limited, if they have any at all. On the other hand, if the homeowner did buy an owner’s policy, despite the earlier invalid foreclosure and the ruling of the court, their title insurance company will protect them and authorize the issuance of a new policy to a potential new buyer.
You have your buyer’s best interest at heart and know their home is their most valuable investment. Before you go to closing, be sure to talk to them about a title insurance policy that protects them now and into the future. At Setco Services, we will be more than happy to work with you and your buyers to explain the benefits of a buyer’s policy and help you to help them protect their new home! Please click below to contact us today, or to learn more about the secure customized closing process we can provide for you and your client.