If you’re in the process of buying or selling a property, “title insurance” is one of the terms you’re probably grappling with. Unfortunately, it’s one you cannot afford to ignore. Before we go farther, what is title insurance? Title insurance is a form of protection against other people coming forward with a claim to your property. When buying a home, title insurance is one of the items required by lenders to complete the process.
Now the question you’re asking is, “who would have a claim to my property?”. Most of the time, these claims are years old and usually result from incidents that occurred before you bought the property. Most of these incidents and records are forgotten only to be uncovered when the property is bought or sold.
Claims against a property can come in the form of liens or taxes incurred from unpaid debts. Other common issues include filing errors, forgeries and issues associated with inheritance. In the case that any of these issues arise, title insurance will protect your claim to the property.
Typically, when you purchase title insurance, the title company runs a title search on the property to identify liens, judgements, encumbrances among other items that need to be verified before the transfer of ownership. Finally, the title company will try to authenticate any signatures in the chain of title to prevent forgeries and deed theft. After the property is cleared by the title company, the the sale will get the go ahead to close.
Do I Need Title Insurance?
If you’re buying a property in an all cash deal, then an owner’s title insurance is optional. Although, the majority of cash buyers still obtain title insurance because claims could negatively affect the value of their purchase. If you’re taking out a mortgage to buy property, the lender will require lender’s title insurance to protect the lender from any claims that might come up after ownership has transferred.
How much is Title Insurance?
The cost of title insurance varies by the sales price of the property. In Pennsylvania, it comes out to approximately 0.5% to 1.5% of the price of the property. It’s a one-time, upfront fee not an ongoing payment.
To get an estimate of what title insurance costs in your area, you can use Fidelity National’s rate calculator or Old Republic’s rate calculator. You could also get a quick quote from Stewart’s rate calculator or First American Title’s fee calculator.