Title Insurance – What does it really do?
When talking about title insurance the question arises , what does it really do for a buyer? In a nutshell title insurance provides the buyer with assurances that the property they are buying has no impediments against it such as mechanics liens, judgments against the seller, restrictions on the property etc. That the property would convey to the new owner without any issues and if there are the title company may be liable.
Digging a bit deeper
Under a lender’s title policy the buyer has no protection. Purchasing an owner’s title policy is an option not a requirement which would be of personal benefit. The cost of the owner’s policy is dependent on the purchase price of the property. If the owner’s policy is purchased first then the title company will issue a lender’s policy for alot less money as long as the loan amount does not exceed the sales price of the property. So if the sellers provide the buyer with an owner’s policy then the buyer can purchase a lender’s policy for around $100 which does not include any endorsement charges. The savings is significant enough on a lender’s policy to do it this way.
Next the buyer should ask the seller for a survey that provides information for amending the title policy to read “shortage in area” only. By doing this the policy insures against discrepancies, conflicts, encroachments or overlapping improvements provided on the survey. Unless a specific endorsement is purchased, it will not provide for coverage in shortages in the area. The current cost (as of this blog writing) of an amendment when purchased by a person and not a business is 5% of the base premium for the owners policy or approx $72 on a $200,000 owner’s policy. Hopefully, the seller will accommodate the buyer’s requests for this , or the Buyer can purchase these items.