I am buying house, do I really need title insurance?
October 13, 2014 Paul A. Sarcona, Esq.
Prior to the closing of title, the public records are searched to find all document which affect the ownership of title, including among others, mortgages, judgments, and covenants, easements and restrictions. A title search is conducted against the property using an abstract search. The abstract search serves as the basis for the creation of a title commitment. Simply put, a title commitment is a report which discloses the results of the abstract in a standard form. Additional searches are performed at the request of the customer as part of the title commitment, i.e., a lender and a purchaser in New York request a certificate of occupancy search. A title insurance policy is issued based upon the results of the title commitment.
Title insurance is a policy issued by an insurance company guaranteeing that the title to real property is free and clear of all issues and properly in the name of the owner and that the owner has the right to transfer or sell the property to a purchaser. In the event that a title issue rears itself, the insurance company will pay the damages to the new title holder or take actions to correct the issue.
In my opinion, the definition of title insurance is a policy usually purchased by a buyer to protect against human error (i.e., mistakes in examining title) and adverse claims that exist against a property prior to the issuance of a title insurance policy (usually the date of your purchase). Essentially, any claim of right or lien prior to the date of your ownership (the date of your policy) is extinguished with the purchase of a title insurance policy. Without title insurance policy you are defending all rights and claims of others out of pocket. Do I need to tell you how much a lawsuit costs to defend? Imagine that you have a complete failure in title which would require you to forfeit the property. All the money you paid for the property would have been lost. Moreover, if for no other reason, once you sell the home, the title insurance policy serves to extinguish any matters prior to the date which you owned the property. In order to protect your property rights, you absolutely should purchase a title insurance policy.
What can possibly go wrong?
- Incorrect property descriptions
- Wild deed chains
- Wild mortgage chains
- Claims by those who stand to inherit, including, undisclosed heirs
- Fraudulent conveyances to defraud creditors
- Property placed on the wrong property during new construction
- Open mortgages of record
- Open liens and judgments of record
- Covenants, easements and restrictions
How much does it cost?
Title insurance is a one time charge at the closing of title. In New York and New Jersey, the cost varies based upon your purchase price and your loan amount. The fee is set by statute. The policy lasts so long as you own the property. Any transfer in ownership of the property voids the policy.
Filed Under: Real Estate