Title insurance is a very important thing to have, when you are buying a property. It does not matter whether you are buying a piece of land, condo, home, apartment building or a commercial property, it is essential to have a title search and title insurance on all types of property.
What most of you probably do not know is that there are some things to look for when you are selecting and buying title insurance. So if you are buying a property, now or in the future, you should take into consideration the following.
Title search: Anytime you buy any type of property, there should be a title search done on that specific piece of property. Typically in California when you buy property, an escrow office will handle the transaction. The escrow officer will usually order a preliminary title report. The purpose of this is to make sure there are no liens on the property or any other unusual activity that would have an adverse effect. There are many different types of liens, encroachments, easements and other kinds of issues that can potentially exist on a property. So you as a buyer want to make sure that the property you are buying has a clear title. Usually during the escrow process, the title search will ensure that the property is free and clear of all liens before you close the escrow. Then of course after the close of escrow, you want to make sure you have title insurance if in the event something shows up on the property’s title.
Title insurance: Title insurance should be issued on any property that you buy to make sure that if something was overlooked in the title search during escrow or if something pops up after escrow has closed. This way title insurance will cover that potential problem or cost. It is customary for the seller to pay for the seller’s title insurance when a property is sold. What is extremely important is that you want to ensure you have a good title policy and not one with so many exceptions that it is basically a worthless policy.
Title insurance companies have different levels of title insurance coverage, just like any car insurance coverage has. When you are buying a property, often the seller selects the least expensive coverage to save money, which in effect provides you as the buyer with very limited and poor coverage.
I was recently reviewing a title report and was surprised to find out how many different categories there are of potential exceptions and exclusions that title insurance companies can include in a buyer’s policy. The potential exceptions and exclusions were extensive. In fact, there were 18 different categories, totaling 95 individual exclusions and exceptions in this particular title report and policy that I was reviewing.
If a seller selects the cheaper title insurance coverage, the average buyer is not going to know it and is going to get an insurance policy that can be so limited it is basically a worthless policy. It is essential to always make sure that you, as a buyer, have the better title policy. On an average, it only costs an additional $100 to $200 for a typical home purchase to have the better title insurance. This is a onetime payment that does not have to be paid annually.
If you are buying a home for example, you want to make sure that you are getting a “homeowners” title insurance policy and that it does not include the dozens of potential exceptions and exclusions. A title report and policy can be a little confusing to read on your own. So you should work with the title representative or your realtor to confirm that you are getting the better policy. This is a simple but very important thing to do when buying any property.
Invalid title insurance: Just like when the average buyer is not aware of the different levels of title insurance when buying a home, sometimes title insurance can become invalid without the homeowner knowing it. If you are a homeowner and refinance your property, put the property into a trust or transfer the property into another name for any reason, title insurance will typically become invalid. So it is recommended that you reinsure your property with title insurance after a “refi” or after you change the property into another name. If you use the same title insurance company, it usually will not cost much to do.
The basic tips above about title insurance and policies are very important, no matter what type of property you buy. Always make sure you get the better title insurance policy by having the title representative or your realtor review it with you. Your home is usually one of your most valuable assets, so it is very important that you ensure it is protected properly.
Trent St. Louis is a licensed Real Estate Agent
and a member of the National, California and
San Diego Association of Realtors. He can be reached at trent@tns.net or at his office in Hillcrest, The Metropolitan Group. DRE#01273643.
