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.
What Could Happen If You Don't Get Title Insurance?
Title insurance protects against the following common hidden risks just to name a few:
Errors or omissions in deeds
Mistakes in examining records
Forgery
Undisclosed or missing heirs
False impersonation of the true owner of the property
Instruments executed under invalid or expired power of attorney
Mistakes in recording legal documents
Misinterpretations of wills Deeds by persons of unsound mind
Deeds by minors
Deeds by persons supposedly single, but in fact married
Fraud
Liens for unpaid estate, inheritance, income or gift taxes
Title Insurance: Lender's Policies and Buyer's Policies
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.
The Law Office of Jeanne M. Reardon assists New York property owners with title insurance matters. To speak with an experienced New York real estate attorney, call us at (516) 314-8433 or e-mail us.