It's very easy to get caught up in the excitement of searching for a property and forget about all the paperwork and legality that goes into the final product of closing on and owning a home. We, as agents, always recommend to our clients that they get pre-qualified by a lender first before they get their heart set on a house they might not be able to afford. Another important aspect to mention on the front end, is title insurance. It is usually brought up later after the buyer is under contract on the house of their dreams. Since title insurance is such an important part of a transaction, we rely heavily on our title companies in order to make the process run smoothly. Many people don't realize that closing on a real estate transaction varies across the country -not all states use title companies- in Idaho we do! For these reasons, we thought we'd lay out some important facts about title insurance
#1: Exactly what is title insurance? This type of insurance protects an owner’s right to possess and use a piece of property. Title insurance also protects homeowners against losses arising from a variety of problems associated with the title to real estate. Title policies are completely different from property insurance policies. While homeowners insurance provides protection against potential future events, a title policy insures against pre-existing title related matters that fall within its coverage.
#2: What is the differences between the owner’s and lender’s policies. Many home buyers wrongly assume that the insurance policy they’re usually required to purchase for their lenders as a prerequisite of a home loan, also protects them against different title issues. The fact is, it does not. The lender’s policy only covers the lender’s investment in the property, up to the outstanding balance on the mortgage. In order for a homeowner to get his own protection, he needs to purchase an owner’s title policy. Knowing the difference between these two types of policies are important when purchasing a piece of property.
#3: The benefits of procuring an owner’s policy. It is difficult to understand the benefits of an owner’s title policy without knowing exactly what it covers. Before issuing title policies, insurance companies perform a complex title search, which can reveal different title faults that may jeopardize the right to ownership later on. To ensure that the title to a piece of property has passed correctly to each new owner, title agents go through public records, past deeds, wills and trust agreements. They also make sure that all the previous liens and judgments have beentaken care of and removed from the title. A title insurer cannot guarantee a perfect title. But since the title search may bring up various title defects, such as the rights others may hold on a particular piece of property, pending legal actions, claims made by previous contractors or undisclosed heirs, etc., unexpected title-related problems are less likely to occur. And even if they do, the title company will defend the title and protect the rights of the policyholder at its own expense. While a standard owner’s policy usually handles claims arising from pre-policy clerical errors, invalid deeds, fraud and forgery, undisclosed restrictions, unknown heirs, liens and judgments, extensive coverage guards against incorrect appraisals, violations of local laws and ordinances, and encroachment issues.
#4: Concerns related to insurance premiums.
The title insurance premium is charged only once, at the closing. What’s more, title insurance coverage lasts for as long as the homeowner or his heirs retain an interest in the property. Another important aspect is that title insurance can only be issued by insurers specifically licensed for that purpose by the Department of Insurance of each state. To benefit from the best possible service, home buyers should look for companies that also hold ALTA certification, which attests that they have implemented the best practices required to protect consumers, deliver quality service and comply with industry regulations.
Hopefully these four points explaining title insurance will help our clients and friends more completely understand the important job our title companies preform. Here are a few of our local favorites here in Ketchum and Sun Valley: