3 Simple Tips for Realtors, Loan Offices, Home Buyers, and Home Sellers to Get the Right Title Insurance

In every real estate transaction, many components come into play: the buyer, the seller, the realtor, the loan officer, and an often-underestimated element, the title insurance. As a home buyer, seller, realtor, or loan officer, understanding the nuances of title insurance can be vital to the success of a transaction. Here are three simple tips for getting the right title insurance.

Tip 1: Consider both Lender and owner’s title insurance policies.

Title insurance is a policy that protects property owners and mortgage lenders from potential risks or losses due to defects in the title of a property. These defects include undisclosed heirs, forgery, or liens from unpaid taxes.

1. Lender’s Title Insurance: As the name suggests, this policy is designed to protect the Lender. If you’re taking out a mortgage, your Lender will likely require this coverage. The coverage amount generally equals the loan amount and decreases as you pay off your mortgage.
2. Owner’s Title Insurance: This policy protects you as the property owner. While the Lender’s title insurance safeguards the bank’s investment, the Owner’s title insurance protects the equity you’ve put into your home. If someone were to contest your ownership rights in the future, your policy would cover the legal expenses to defend your claim and any loss in the event of a title failure. Unlike the Lender’s policy, the Owner’s title insurance offers coverage up to the home’s total value and lasts as long as you or your heirs own the property.

While the Lender’s insurance is mandatory in most mortgage processes, the Owner’s title insurance is optional. However, given the potential risks, it’s strongly recommended for property owners to consider both. It’s a one-time cost that can offer peace of mind for a lifetime.

Tip 2: Compare quotes for title insurance.

In the real estate industry, savvy professionals and homeowners know the importance of shopping around. Just as you would compare mortgage rates or home prices, getting multiple quotes for title insurance is crucial.

1. Standard vs. Enhanced Policies: Title insurance companies might offer different levels of coverage. A standard policy might cover common title issues, while an enhanced policy might provide additional protection against risks like zoning disputes or forgery after the policy issue date.
2. Comparing Fees: Beyond the premium for the insurance, some companies may charge additional fees like search fees, closing fees, or mail/courier charges. When comparing quotes, ensure you look at the total cost, not just the premium.
3. Ask for Recommendations: Your realtor or loan officer can be an invaluable resource. They’ve likely dealt with multiple title insurance companies and can offer insights into their experiences. However, always research and ensure you’re making the best decision for your unique situation.

Tip 3: Look for a policy with comprehensive coverage.

A title insurance policy is only as good as its coverage.

1. Know the Exclusions: Every policy will have a list of standard exclusions it doesn’t cover, such as disputes arising from boundary lines, environmental protection laws, or indigenous land claims. It’s crucial to know these and understand what’s not protected.
2. Look for Additional Endorsements: Depending on your property and location, you might need additional endorsements to your policy. For instance, if you’re buying a property with a shared driveway, you might want coverage that protects against potential disputes with neighbors over its use.
3. Coverage Longevity: While the Lender’s title insurance decreases over time and ends once the mortgage is paid off, the Owner’s policy lasts as long as you (or your heirs) own the property. Ensure you’re getting a policy that offers long-term protection.

Title insurance is a vital component of the home-buying and selling process. It offers an essential layer of protection against potential legal battles over property ownership. Whether you’re a realtor, loan officer, home buyer, or seller, understanding title insurance is key in the real estate industry.