If you are buying a home, you are also entering the world of title insurance. That’s because buyers of a home are, in a sense, actually buyers of that home’s title — the paperwork that proves that the existing owners do own the property, and have the explicit right to sell it.
According to experts, nearly one-third of all title searches turn up a problem with the property’s title — an issue that has to be dealt with and resolved before any home sale can transaction can close and fund. That’s where title insurance comes in.
A title insurance company will conduct a thorough search of the property’s records to establish a seller’s right to sell the property in question. This search is done to make sure there have not been any errors in the paperwork in the past, or previously unknown complications such as liens on the property or third parties with a claim to ownership; this can be unpaid taxes, solar equipment, or home equity lines of credit from another bank. Once the title company searches to the satisfaction of the title insurer, they will issue two insurance policies on the title. One is designed to protect the buyer should any claim on the property show up later in the sales process. The other is designed to protect the interests of the lender. The creation of these policies typically occurs after all closing paperwork is duly collected and all closing payments have been made.
Your real estate agent or lender will likely have a relationship with one or more title insurance companies and will be able to answer any questions you may have about the title insurance process.