These days it seems like you can buy insurance for just about anything! Life insurance, health insurance, auto insurance, home owners insurance, and what's that --- title insurance?

First off, "title" is a legal term for an owner's interest in a piece of property. When a property is sold, the Seller conveys "title" to the Buyer through the use of a recorded deed. Prior to closing, the closing attorney must conduct a "title search" to ensure the current owner can convey ownership of the property to the Buyer.

So, if the title search would discover any problems with the title, why would the title need to be insured? There are a number of reasons why a buyer might purchase a property and then later discover a "title defect," including: forgery, impersonation, undisclosed or missing heirs, undisclosed (but recorded) prior mortgage or lien, fraud; erroneous or inadequate legal descriptions, lack of right of access, deed not properly recorded, etc.

The possibility of these unknown title defects creates a need for title insurance, which is an insurance policy protecting the holder from loss sustained by defects in the title to the property.

There are two main types of title insurance that may be involved in your transaction --- lender's title insurance and owner's title insurance. Your lender will require you to purchase a lenders title insurance policy on their behalf. This policy will be based on their interest in the property, the loan amount, and will allow them to recoup that money should the house be reclaimed by a prior owner due to an unknown title defect.

The decision you will need to make at the closing table is whether to purchase an owner's title insurance policy. This policy would protect you from sustaining any future financial loss due to the discovery of a title defect. Title insurance involves a one time payment at closing, and the policy lasts as long as you own the property.

While every situation is different, in almost all situations, I recommend that you buy title insurance.

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Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com