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In some states, having an owner’s title insurance policy will not be mandatory when you purchase a new home. However, it is often recommended because of the peace of mind that it can provide to you when you are done with the large purchase of a home. For a one-time fee, the policy will help to protect you against many defects which could affect your own ability to sell the home later on if you decide.
If you have just applied to get a loan for a new home and the lender requires title insurance, the lender’s policy is not going to protect you, it will protect them. This means that you will not have the protection that you need from defects in the title unless you purchase the owner’s policy as well.
But is it such a bad thing to go without the title insurance policy in the first place? Many homebuyers are stuck with a lot of fees when it comes to purchasing a new home and they may be nervous about dropping more on something that they may not feel they need. There are actually a few things that can go wrong if you are not careful about purchasing your own title insurance policy at closing. Some of these include:
Consequences Of Not Having Title Insurance
Being Responsible For Debt That Isn’t Yours
Let’s look at a scenario to see why this is a bad thing. Five years ago, a home owner wanted to list their home for sale and then decided to hire a contractor to get the home fixed up. They got the contractor to do the work, but they moved out of the home and didn’t pay the contractor. The contractor still wanted to get paid, so they put a lien on the home, even though it has a new owner.
At some point, the newer owner will decide that it is time to sell the home and when they work with the title company, they may find a lien, which had been put onto the title right before they took over ownership of the home. Since they took precautions and got the right title insurance, it would be up to the title insurance to take over this claim between the contractor and the homeowner to save money and still get the lien removed in order to make the title free and clear again. Without this policy, the homeowner could be out of luck and would have to pay the contractor for the work before they could sell the home.
A lien can result not only from a contractor who is not paid for their work, but it is also possible that the lien will come up if the previous owner did not pay their mortgage, missed out on utility bills, or even didn’t pay property taxes. The policy is there to protect the homeowner from any of these types of liens, but the issue has to happen before the title insurance was issued. Anything the new homeowner does to cause a lien on the property is their responsibility, not the insurers.
Encroachment Issues That make You Lose Some Of The Property
Property encroachment is actually a problem that is more prevalent than most people realize. One example could be that you find that the double garage of a neighbor is encroaching on your land by three feet. Since the new addition was added before the homeowner bought the property and this error wasn’t found when the title company did their search, the title company would pay for the homeowner to get the new survey, helping to figure out where the property lines are before anything else happens.
If there is a problem, then there could be some negotiations with the neighbor and sometimes there is a way to fix it without a long time in court that can waste a lot of money. Without the owner’s title insurance, the owner would be the one who would have to pay to get the survey done and handle all of the work.
Losing Ownership Of The Property
In some cases, it is possible that the new owners could lose their property after purchasing a property if they do not have the right insurance in place. This may happen when a seller wants to get rid of a property that they own with someone else. There are many situations where the seller will decide to sell the property that they may have co-purchased without a spouse or a sibling, without really understanding that all owners would need to sign to sell the home legally.
A few years later, these other owners may show up and claim that they are the ones who actually own the property. If this happens and you have title insurance, then the insurer will step in and protect your investment. Without this policy, you may lose the house to the other person who claims the property. This can leave you homeless and with nothing to show for all the years that you lived and paid for the mortgage.
An owner’s title policy is meant to help protect your rights of ownership in the home in many other types of situations as well. This can include forgery, fraud, conflicting wills, and even missing heirs. You will have to take a closer look at your unique policy to see what all is covered to make sure that you get the full protection that you deserve and that you will be able to live in your home without worries for years to come.
For most home buyers, it makes a lot of sense to have title insurance in place from the moment that they purchase the home. This will provide them with some protection in case something happens on the title and someone tries to lay claim on the property along the way. Working with a title company is meant to ensure that you are not going to end up with a big legal mess after purchasing the home, and title insurance will provide protection in case the title company misses something.
When you are looking for the right title insurance, you want a name you know and trust. There are many great title companies out there that you can choose from, but no one will provide you the customer service and great prices as Sunnyside Title Company. We are here to help our customers through every step of the process, ensuring that they are protected and can move into their new homes with peace of mind.
