Purchasing a home means that you are paying for the right to occupy and use the
property. Provided you are doing so within the town and cities code policies, that
right is legally binding. Filing a title with the Registrar of Deeds or the County
Courthouse means that you now own the property. You may however run into challenges
to your ownership if there are liens placed against the title.
Challenges to Ownership
Prior owners, creditors of prior owners, those who worked on the property
and others are free to challenge your ownership. You might be wondering how this
is possible. It is actually very simple. If the prior owner had any outstanding
obligations that resulted in non-payment there may have been liens placed
on the property.
Protecting Yourself With Title Insurance
A buyer's title insurance policy can help protect you. Title insurance
is protection against a "defect" in the title. Prior liens count as
defects. A defect is anything that offers a third party the right to say that they
might be a part owner in the property that you believe you own. Protecting your
right to the property is inexpensive and easy to do.
You can protect yourself by purchasing a buyer's title policy. This
can help save you hundreds or even thousands of dollars. You would be required
to defend yourself if any title defects were challenged. Some property owners
have found themselves in the position of losing the property (be it home or
land) because they could not successfully defend themselves.
What Does a Buyer's Policy Protect Me From?
A title insurance policy is meant to help you clear up any title defects.
Title insurance companies will handle litigating issues and will reimburse
the owner for losses. Title insurance is paid in a one-time premium
and as long as you or your survivors own the property, the policy is in effect.
The title insurance company would help secure your right to the property.
They will handle all of the litigation against any claims. In the event that
fighting a claim incurs expenses, the insurance company will pay those expenses.
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Are There Other Types of Policies?
Yes. Your lender has protected themselves from a loss as well. This policy is
called a Lender's Title Insurance Policy. These policies are taken
out by lenders on all mortgages issued whether they are for buying a home or
refinancing a home.
If The Lender Has a Policy Why Do I Need One?
Simple - the Lender's Title Insurance Policy protects the lender. It does not
protect you. A lender's policy is designed to protect the lender from liens on the
policy that affect their lien position.
Do I Need a Policy If I Am Building a Home?
Yes! Very simply, someone who worked on your home could place a lien on it. There
is a possibility that the person you purchased the land from might have used the land
as collateral on another loan. Other possibilities include issues with easements that
could be placed against the title.
Title Insurance protects you from loss. The small cost of a title insurance
policy can save you hundreds or even thousands of dollars. Your lender is going
to be protected against title problems, you should be protected as well.
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