As a real estate agent, you are a trusted advisor who works to effectively and efficiently guide your clients through the home-buying process to a successful closing. However, as the closing transaction gets closer, the amount of paperwork and associated fees can be overwhelming to even the most experienced home buyer. And among the more misunderstood areas of real estate transactions are questions about title insurance.
Let’s take a look at some of the common misconceptions about title insurance and offer some clarity on just what title insurance is, how it protects the homebuyer, and why it costs what it does.
#1 There is only one type of title insurance
There are actually two types of title insurance policies: an owner’s policy and a lender’s policy.
- An owner’s policy protects you, the property owner, against loss or damage in the event there is a covered title defect in your right of ownership to the property.
- If you’re obtaining a mortgage loan to purchase your home, a mortgage lender will likely require that you purchase a lender’s policy, which protects the lender’s interest in the property until the mortgage loan is paid in full.
#2 Title insurance only offers minimal protection
A title search does due diligence during any property transaction, but mistakes can be made and things can be missed. Oftentimes a home or piece of land has been owned by numerous people stretching back a century or more. Title insurance protects the homebuyer’s ownership rights from possible errors, and from future claims or undiscovered interests as long as they—or their heirs— have an interest in the home.
#3 Title Insurance is Expensive
The one-time premium for an owner’s title policy is based on the purchase price of your home and accounts for only a small percentage of your closing costs. Coverage is provided for as long as you and your heirs own the property.
#4 Paying Cash Eliminates Need for Title Insurance
An all-cash purchase eliminates the requirement of a lender’s policy since there is no mortgage loan to insure. However, an owner’s policy protects you against possible loss or damage from a covered title defect and an all-cash transaction does not eliminate these risks.
#5 Title Insurance and Homeowner Insurance Coverage Are the Same
While a homeowner’s policy protects against loss from theft or fire and wind damage, the home title insurance protects from hidden title hazards that threaten the owner’s financial investment in the home.
#6 You Don’t Have a Choice In Which Title Company You Use
The buyer generally has the right to choose the title company when the property is purchased with the assistance of a mortgage loan. The property seller may not require the buyer to purchase title insurance from any specific title company unless it has been instructed that the seller will pay for both the owner and lender policies associated with the real estate transaction.In a highly competitive industry with all the pitfalls that can occur with financing, Ohio Real Title clearly stands out. We provide calm where sometimes it doesn’t exist because we believe everyone deserves an easy, successful transaction during a stressful time. This is who we are. Contact us today.