Title Insurance – You Need It!

Q: Marsha, I’m buying the home I’ve rented for five years from my friend and landlord. It’s an off market, all cash transaction. Do I really need to purchase title insurance? I’m not even sure what it is. It seems like just another added expense. 

A: Yes, you must purchase title insurance. It will be some of the best money you’ll ever spend in a real estate transaction. So: what is it? Most insurance policies insure the purchaser against potential future events such as fire, accidents, or floods. Title insurance protects you against past events. The title officer will research the chain of title on your particular property. He will delve deep into the property’s history to find all liens, judgments, defects, easements, encumbrances, and county records relating to the parcel. When the title officer is satisfied with the chain of title, he will issue a policy insuring clear title to your property. 

Each time a parcel is purchased or refinanced, a lender’s title policy is required. This policy covers the lender for money lent, but it does not protect the purchaser. That is a separate title insurance policy purchased once at the time a parcel changes possession. Once purchased it never expires. The cost of this policy is based on the property’s value.