When you are buying real estate, title insurance is an insurance policy purchased from the title company. The company researches the history of the title, ensuring that the real estate in question is legally clear to sell. The title insurance means that the title company is willing to back their research and correct any mistakes if it is later found that the land should not have changed hands in the first place.
Title insurance may be required to obtain a mortgage because it protects the lender in case of a title issue. This is lender’s title insurance; you’ll also want an owner’s policy, which provides you protection as the buyer. Be sure that you know exactly what title insurance covers and what it does not cover. For example, title insurance does not cover liens that do not show on public records, nor does it cover easements or other disclosed title issues. Despite these exceptions, if you don’t purchase title insurance, you are still assuming quite a bit more risk when purchasing a home or other piece of real estate.
How does title insurance cover you? Let’s say you purchase a newly constructed home that is part of a subdivision. The title is clean and the purchase goes through smoothly. Down the line, let’s say the sub-contractor never got paid for his work on your home, or the builder never paid off his mortgage. The sub-contractor or lender could conceivably place a lien on your property, and you would be responsible for these costs unless you have title insurance.
To illustrate further, let’s assume you purchase a home that is being sold because the previous homeowner passed away. Years later, a long-lost child of the homeowner could knock on your door and claim to have inherited your house from the previous owner. If the long-lost child’s claim proves to be valid, you could be forced to vacate and forfeit ownership—not to mention losing all the money you spent on the property. Title insurance would also cover you situations like these, and and in many cases they the insurer can even negotiate with the claimants so that you can keep your property.
There are all sorts of situations like these that you simply can’t foresee when buying real estate. This is why it’s so important to make sure your title is insured.
Title insurance is only available after a land survey is conducted on the land in question. ALTA and ACSM land surveys cover not only the boundaries of the property, but also additional information that may go against the purchaser’s interests, such as evidences of possession. The land surveyor will search to discover any information that might demonstrate that purchasing the land is not in your best interests.
The ALTA and ACSM land surveys are conducted within a strict set of land surveying standards developed to promote uniformity within surveying. These surveys can be performed on both commercial and residential property, and they show buildings and other improvements, as well as easements, rights-of-way, and other claims to the land. This type of land survey goes above and beyond marking the boundaries on the land itself; it also includes records research to ensure that the title is clear. This can help catch problems even before the land changes hands and title insurance is needed.