Title insurance is one of those things in life that many of us have heard of but don’t know much about. It’s been around “forever”. It isn’t flashy but you’re glad you have it when its needed. If you’re considering buy a property or mortgage note, you need to read this article.

 How do you know the person selling you a property owns it?

 I live outside San Francisco, California in a little town on a river. In the 1850’s an aspiring young man ventured from Kansas to make his fortune in the new world. Seeing the gold rush hustle and bustle he decided to stay. He toiled mining gold and took various jobs struggling to survive. One day he realized that as the town expanded there were opportunities in selling the surrounding land.  He had a map drawn, worked with a lawyer to draft sales documents and deeds and quickly made a fortune selling commercial plots to settlers eager to sell goods to miners and ranchers. In several months he returned to Kansas a rich man. Unfortunately, as the buyers started to record their new deeds, they discovered that the documents were fake, their purchases worthless and they’d been swindled. That’s why we need title insurance.

 Title insurance agencies investigate a property’s historical ownership to ensure that each seller/buyer had the right to buy or sell the property. This is known as having “Clear Title”. It means that a person or entity owns a property free of any liens or encumbrances. If a property has an undisclosed lien, forged documents pertaining to it, errors in the public records or unresolved legal disputes from previous owners these are called “Title Defects”. It’s the title company’s job to discover and help an existing or new owner cure them. Title defects must be resolved before an owner can gain clear title. Without title insurance an owner could face legal battles, financial losses, and lose the property. Since lenders use the property as collateral, they require title insurance before they will make a loan. If they don’t have a clean claim to a property its worthless as collateral. Thus, title insurance is a safety net that covers the property owner and lender from any unforeseen issues. It also covers claims that may not have been discovered during the initial investigations. If a defect in the title is found, the owner might have to incur legal costs or financial losses. The insurance also covers those losses. Title insurance policy costs are included in the closing costs when a property is purchased.  No other payments are required during the term of ownership. Therefore, owners can rest assured that will be covered in case of a title claim. This makes title insurance essential if a property owner wants to be confident, they have clear title and are insured against related losses.

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