Jeanne M. Reardon

Title insurance is crucial for a home buyer because it protects you and the lender from the possibility that your seller doesn't -- or previous sellers didn't -- have free and clear ownership of the house and property and, therefore, can't rightfully transfer full ownership to you. Problems with the title can limit your use and enjoyment of the property, as well as cause you financial loss.  This is why you need title insurance.  

Your real estate attorney will arrange the process of getting you title insurance soon after your Contract of Sale is signed.

Title insurance protects against the following common hidden risks just to name a few:

Title insurance is typically a combination of two policies: a lender's policy and a borrower's policy. Your lender -- assuming you're taking out a mortgage, will require that you buy a lender's policy (also called a "mortgagee's policy") to pay for its legal defense costs and reimburse any mortgage payments you can't make because you've lost the house to someone else's claim on it.

The lender may also require you to buy an "owner's policy," covering your own legal fees and other losses, as yet another step toward protecting the lender's collateral. Your title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.  Title insurance will give you the peace of mind in knowing that the investment that you have made in your home is a safe one.

See New York Times article by Amy Gunderson, "HOME AWAY: When You Need a Zoning Variance", for further discussion on zoning variances.

It is a commonly accepted practice for home buyers to purchase title insurance.  Title insurance provides buyers, and their lenders with coverage up to the full purchase price of a home in the event a valid title claim is instituted against the property.  Buyers of co-ops, however, rarely purchase title insurance.

Since co-op buyers are not purchasing real estate, but rather shares in a corporation – accompanied by a proprietary lease that gives the buyer the right to live in the co-op, traditional title insurance would not cover the buyer's ownership interest in the shares.  Consequently, the Title Rate Service Association (or Tirsa) created an endorsement to the standard title insurance policy that would cover co-ops.  The Tirsa endorsement is known in the title industry as "leasehold title insurance."  This endorsement insures the buyer's interest created by the proprietary lease.

Just as title insurance provides protection in the event that the title search conducted before closing failed to uncover a valid lien against the real property, the leasehold endorsement provides similar protection in the event the lien search failed to uncover liens against the seller of the co-op.  However, the Tirsa endorsement never really caught on with co-op buyers.

As an alternative to the Tirsa endorsement, the State Insurance Department, approved the Eagle 9 policy for sale by title companies to co-op buyers.  The Eagle 9 – unlike the Tirsa policy, is not a real estate policy with an endorsement.  Rather, it is a policy specifically designed to insure the buyer's interest in the co-op.  The Eagle 9 policy insures the buyer for loss and legal expenses resulting from claims arising against previous owners of the co-op.

Additionally, the Eagle 9 policy is significantly less expensive than the Tirsa policy.  

Considering the substantial investment involved in purchasing a co-op, the cost of the Eagle 9 policy, which is far less than title insurance for real property or the TIRSA endorsement, is a worthwhile outlay in order to protect your investment and give you peace of mind.

Buying a house may be the most significant and expensive purchase you will make.  When you make such a significant investment in the purchase of a home, how can you be sure that there are no problems with the home's title?  Problems with the title can limit your use and enjoyment of the property, as well as cause you financial loss.  This is why you need title insurance.   

Title insurance will pay for defending you against any lawsuit attacking your title, and will either eliminate title defects or pay your financial losses, up to the amount of the policy.  Your title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.  Title insurance will give you the peace of mind in knowing that the investment that you have made in your home is a safe one.

There are two basic types of title insurance: Owner's title insurance, called an Owner's Policy, and Lenders title insurance, called a Loan Policy.  Most lenders usually require a Loan Policy when they issue you a mortgage. The Loan Policy is usually based on the dollar amount of your mortgage. It only protects the lender's (or any subsequent lender to whom the loan may be sold or assigned) interest in the property should a problem with the title arise. It does not protect the buyer.

Only an Owner's Policy fully protects the buyer should a covered title problem arise with the title that was not found during the title search.  The Owner’s Policy is ordinarily issued in the amount of the purchase price and protects the homeowner from the potential risks which can arise. It is purchased for a one-time fee at closing and lasts for as long as you or your heirs have an interest in the property. 

Title insurance is issued after a careful examination of the public records. Prior to issuing its title policy, a title company will perform a detailed search of the property records going back many, many years in search of title defects.  Sometimes however, title problems occur that could not be found in the public records or are inadvertently missed in the title search process. Even the most thorough search cannot absolutely assure that no title defects are present, despite the experience of professional title examiners. In addition to matters shown in the public records, other title problems may exist that cannot be disclosed in a search.  An Owner's Policy of title insurance will help to protect you in these events.

Title insurance protects against the following common hidden risks just to name a few:

Every homeowner must, however, carefully read the insurance policy. There are numerous coverage exclusions contained in an owner’s policy, such as:

There are a number of such exclusions from coverage, and all buyers should discuss these issues with their attorney before going to closing.