What is Title Insurance?
Buying a home is probably the single biggest investment you will ever make. Before closing on the house, you’ll want to know that no other individual or entity has a right, lien or claim to the property. Read on to learn what is title insurance for.
Determining that your rights and interests to the property are clear is the business of a title insurance company. During escrow process, the escrow company completes extensive research into relevant public records, any recorded liens, encumbrance, maps and documents to trace ownership of the property and determine if anyone other than you has an interest in the property. Through its research, the title insurance company can usually identify any title problems that may arise and have these problems cleared-up prior to closing. Then only the policy will be issued. There are two types of title insurance: Owner’s Policy and Lender Policy.
Do I need Title Insurance?
Absolutely. Title insurance is a way to protect what is likely your largest investment — your home. An Owner’s Policy provides peace of mind that your title company will stand behind you if a covered title issue or defect arises after you have bought your home.
What Does Title Insurance Cover?
Your owner title insurance owner policy will describe the property and outline any recorded limitations on your ownership. It will also set forth the title insurance company’s responsibilities should any claim covered by the policy terms arise.
In general title insurance covers you in case of an error or omission in the deed, any hidden heirs to the property, forgery, or fraud. Of course you will want to get a copy of the policy that is proposed ahead of time to review the exact coverage provided by your policy. If someone should file a claim with the court against you as owner, then the title company should testify in your defense and give evidence that the claims against your property are no longer valid.
If you take out a mortgage on the property your lender will require that you have one title insurance policy to protect them (called a Lender Title Insurance Policy). A separate title policy (called an owner’s policy) is necessary if you wanted to cover yourself. Coverage lasts for the entire time you own the home.
Types of Title Insurance
There are two types of title insurance. An Owner’s Policy protects the buyer’s interests while a Lender Policy protects the lender’s interest.
What’s Owner’s Title Insurance?
An Owner’s Title Policy is designed to protect you from covered title defects that existed prior to the issue date of your policy. If a valid claim is filed, your Owner’s Policy, subject to its terms and conditions, will cover financial loss up to the face amount of your policy.
Who is Paying Owner Title Insurance?
According to Arizona Residential Purchase Contract, section 3c:
“Buyer shall be provided at Seller’s expenses an American Land Title Association (“ALTA”) Homeowner’s Title Insurance Policy, or if not available, an ALTA Residential Title Insurance Policy, or if not available, a Standard Owner’s Title Insurance, showing title vested in Buyer. Buyer may acquire extended coverage at Buyer’s own additional expenses. If applicable, Buyer shall pay the cost of obtaining the ALTA Lender Title Insurance Policy”
In short, when you are buying a home in Arizona, the seller will pay the buyer’s homeowner title insurance policy.
What’s Lender’s Title Insurance?
A Lender Policy assures the lender of the validity, priority and enforceability of its lien (mortgage) – serving as protection for the lender’s security interest in the property. A Lender Policy is issued in the amount of the loan, and liability decreases as the mortgage is paid off by the borrower. Most lenders require borrowers to purchase this type of insurance policy to protect their investment.
Who is Paying Lender Title Insurance?
It is buyer responsibility to pay the cost of obtaining Lender Title Insurance Policy and it will part of the buyer closing cost.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Chandler AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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