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Hey, you're in the real estate zone--YOUR HANDYMAN ZONE!

Buying a House Category

Real Estate :

Title insurance, its purpose and obtaining it.

Guide:

 

When in the process of buying a new house, you should consider purchasing a title insurance policy as an owner/buyer, which is usually optional relative to the virtually standard practice of the lender buying a lender's policy.

A buyer's title insurance policy is specifically designed to do the following:  Act like a contract in which you, and the lender if a lender's policy is purchased, are contractually provided financial protection by an insurance company, for having paid an insurance premium, from any losses that may result because of a title defect or encumbrance.  Such title defects and encumbrances of a real estate transaction that are usually covered by a title insurance policy include the following:

  • Claims against, or otherwise disputes about, your ownership of the real estate; and

  • Hidden problems that existed prior to your taking ownership, such as unpaid taxes, defaulted mortgage payments, judgments against the property seller, liens, and other land restrictions.

All losses sustained as a result of the above defects or encumbrances, including legal costs, are paid up to the full value of the insurance policy.  A title insurer, as a matter of course, will conduct its own title search to determine whether such defects exist, and this search encompasses the review of public documents relating to the real estate parcel in question.

There may be exclusions to the coverage above, and such exclusions may include the following:

  • Defects you knew about before obtaining ownership but did not act upon;

  • Real estate that is condemned;

  • Zoning violations or other applicable building code violations;

  • Restrictive covenants that limit the use of the real estate;

  • Renter possession claims;

  • Right-of-usage real estate claims when the real estate is in the vicinity of a body of water;

  • Real estate boundary line disputes; and

  • Real estate improvement encroachment disputes.

In your situation, see certain restrictions and applications that concern your unique insurance policy for more information.

Generally, it is your right to choose what insurance company you want to provide you with a buyer's title insurance policy.  A title insurance policy can be purchased from any licensed title insurance company in your state.  Given that title insurance companies compete for your business, you will find varying costs, fees and rates from which to choose.  So, when you're hunting for a buyer's title insurance policy, here are some things to keep in mind:

  • Your buyer's policy should insure the full purchase price of the real estate and its improvements (i.e., the new house);

  • Ensure that your buyer's policy completely describes the legal description of the real estate,  all of its improvements made thereon and any other interest unique to your transaction of which you may be gaining ownership;

  • Make sure the closing date of the escrow is the date upon which your buyer's policy becomes effective; and

  • Make sure you ask for any discounts available to you, whether as a first-time home buyer, the mere corresponding action of receiving a reduced rate as that of your lender (i.e., a "simultaneous issue rate"), or because of any special circumstance in your situation warranting a rate reduction.

For more information about title insurance and to tend to your particular needs and questions, contact your state insurance department or a local title insurance company in your area.  You may also seek to research the Real Estate Settlement Procedures Act, a federal law that prescribes the process of most real estate-title insurance transactions.

So, good title insurance hunting!

Ed the Handyman

            &

Your Handyman Zone Team

 

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