All real estate buyers should consider purchasing title insurance. The premium is approximately $4.00 for every $1,000 of the purchase price. Some see this as an added cost to the deal. But the cost is well worth the value provided in a real estate deal.
Title insurance insures against the risk that there is an existing defect in title to the purchased real estate not disclosed to the buyer. Title defects can adversely affect the buyer’s ownership rights and use of the property. For example, a previous owner could claim title to a property where the underlying documents conveying title were not executed by all the necessary parties. Perhaps only one owner signed the deed when the property was owned by multiple parties. In that case, the party who did not sign the deed conveying title to the property has a claim for his or her interest in the property. This could happen in the case of property owned by separated spouses when only one spouse signs the deed, business partners, or in the case of real estate owned by multiple beneficiaries to an estate when only one beneficiary signs the deed conveying title. Alternatively, there could have been existing liens on the property that were not satisfied before the property was conveyed. In these instances, title insurance is crucial to protecting a buyer.
If a pre-existing and undisclosed defect becomes known after closing, a homeowner can make a claim with her respective title insurance company. A title insurer will pay for valid claims or the cost of a lawsuit to remove the defect. A good title insurance policy can prove invaluable.