Title insurance, in general, offers protection against any problems with the title, or legal ownership status, of the home. Any lien against a home or competing claim of ownership could jeopardize your financial stake in it, as well as your mortgage lender's. So the lender's policy covers the lender's stake, while the owner's policy covers your personal stake.
Common situations that arise where title insurance would bring peace of mind and help resolve the issues are:
Second Sellers: Sometimes a distant relative—or an ex-spouse—may surface with a claim that they actually own the property, in whole or in part, and that the seller had no right to sell it to you. If that happens, a judge could confirm the party's claim, which means you could be faced with buying them out, having to negotiate, or ... setting a bathroom schedule with a new roommate, says Marc Israel, president and chief counsel of MIT National Land Services, a title company in New York City. And say good-bye to that equity.
If a judge rules in favor of someone staking claim to a house, the lender’s title insurance policy will only pay for court costs incurred by the bank, and it will reimburse the bank for what you owe on the mortgage if the sale is deemed null and void, Zawadzki says. An owner's title insurance policy will cover your financial losses, such as attorney’s fees and court costs, even if you have to move out of the house.
Overreaching Neighbors: The adage that good fences make good neighbors might not hold true if it’s discovered that someone put up a fence, deck, shed, pool, driveway, etc., on your new property. And should that happen before you close, Israel says title insurance will pay the cost of any legal battle or efforts to settle the matter out of court and have the item removed from property that is legally yours.
Hidden Mortgages: Just as with liens, it’s possible a title search might not uncover a mortgage until after closing because it was posted incorrectly with the county recorder, Israel says. “Because the buyer received a clear title at closing, if an owner title insurance policy is in place, the buyer just has to file a claim and the policy will pay off that lingering mortgage,” Israel says.
Unpaid taxes: Even though a tax search might come up with no delinquent taxes on a property, that doesn’t mean a buyer couldn't subsequently receive notification of delinquent back taxes after closing. And that bill could be heavy—unless the buyer has owner's title insurance. An owner’s title insurance policy would pay for this because the buyer was given paperwork that indicated taxes were paid.
Northwest Florida is not exempt to title discrepancies. In fact, we’ve seen several issues arise locally. People may think they own a parking spot at their building and their title doesn’t reflect ownership of the spot. Someone may have defaulted on their primary home loan somewhere else, and even though their second home here is okay, there’s a lien against the property.
At SETCO, we believe your home purchase should come with peace of mind. That’s why we use Fidelity underwriters to search your title’s history and ensure you have a “clean” title record. Contact Us today to find out how we can ensure your peace of mind with all of your closing concerns, including title insurance!