March 24, 2022
4 RISKS COVERED BY TITLE INSURANCE
As you view the many forms, documents, and conclusions that must be considered while buying a new home, you may feel like title insurance is not worth your engagement. However, title insurance can be a priceless part of your closing, and it is relatively simple to acquire. Unlike most other kinds of insurance paid monthly, you can secure a policy for a one-time fee at closing, and it will save you from a wide variety of potential issues with the title of your home. Some of the most typical risks covered by title insurance include the following:
Forgery And Other Types Of Fraud
Fraud is more common than you might think in the real estate world, and many possible forgeries can happen. For example, the deed to your property itself could be forged; more typically, however, transfer documents may be falsified that allow a home to be sold by someone who does not own it. Wills are another relatively common source of forgery troubles. Still, no matter the scenario, those without title insurance could face hefty costs to defend their claim to the home they purchased.
Liens On The Property
Possibly one of the most frequent uses of title insurance is to protect the buyer from previously unknown liens on the property. A lien is a claim that another party still has on your property; the lienholder can range from the government (if you fail to pay taxes) to a mortgage lender if the owner defaults on payments.
Failure to pay child support or different debt can also result in liens on the property. If these are not uncovered before the property changes hands, the new owner will be responsible for any liens still on the home, even if they were not the ones responsible for the lien placement in the first place. Title insurance can shield you from this outcome.
Adverse Possession Claims
In some situations, other people who have not purchased property can still claim to live there. Most commonly, this happens when a squatter has lived at a location for long enough without being evicted that they may claim legal rights to the property. This is called adverse possession, and some types of title insurance will protect you from the potential for adverse possession claims.
Previously Unknown Heirs
Another common issue with a property’s title can arise when heirs claiming the property are not known before purchase. In order for a property to change hands, it must be granted with the consent of all involved parties; if an earlier owner’s children, who were granted the home in a will, agreed to the sale, but you learn after the purchase that a child from a previous marriage wants to claim the home, this formerly undisclosed heir could succeed in claiming the home from you, even if you successfully purchased it.
Similarly, issues with wills and the home being bequeathed to numerous people could jeopardize your claim on the home, resulting in the risk of losing your home and unneeded expenses related to defending your claim legally. Title insurance is designed to safeguard you against this possibility.
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