So you’ve helped your client find a new home, their offer has been accepted, they’ve had it appraised, received their mortgage approval and all is clear for their settlement. Congratulations – you and your buyer are almost there! But there is one more important item to consider at settlement to safeguard your client’s large investment – title insurance.
It provides protection for your client and the lender from the possibility that the seller, or previous sellers, did not have clear title to the property and can’t correctly pass the property on to your buyer. Once their purchase contract is ratified, the title company will search the local title records to determine the property’s “chain of title.” Specifically, they closely examine title documents to determine insurability, checking any issues that must be resolved before the property can be sold.
These can include paid but unreleased mortgages, judgments outstanding against people with similar names, estate/will claims and mechanic’s liens (a previous owner failing to pay for work done on the home). Although a title search is performed and analyzed by the title company, unforeseen defects in the title can appear later. A title insurance company insures against losses resulting from covered title defects.
For example, the seller may have purchased the house from a single woman, not realizing that her ex-husband, who was a co-owner of the home, did not sign off on the sale as required. The ex-husband could later place a legal claim on the rights to the property. Owning a title insurance policy will cover the costs and fees associated with defending the claim.
What could happen without title insurance?
The risks of not having title insurance can be compared to the risks of not having health insurance. Owner’s title insurance will cover your client if any future title defects arise. Just because a title search was completed does not mean title problems couldn’t potentially surface in the future. Without title insurance, your buyer could be faced with significant legal fees, costs, and even the loss of all, or a portion of their land or home.
Your settlement partner can answer any questions you or your client may have about title insurance. Long & Foster Settlement Services has settlement providers conveniently located at over 65 locations in the Mid-Atlantic and Northeast regions—and their settlement experts can work alongside you to help guide your clients through every step of the home-selling process.