When you purchase real estate, you will hear the term title insurance. What does it provide, what does it cost, and why do you need it?
Title insurance insures against financial loss caused by defects in title to real estate as defined by Texas Department of Insurance. Title insurance companies will defend you against any lawsuits from claims of ownership by other parties, lawsuits from liens, or other claims against your property.
Title companies are required to search ownership back to 1979 but most title companies can search further back, says Dawn E. Moore of Allegiance Title Company. This search is to confirm there are no ownership issues or liens before you purchase a property.
I had a client once that was very proud to tell me how much he saved by purchasing his property without going through a title company and didn’t see the need to pay for it to sell his property. Well, when we submitted the contract through the title company to sell his property, it was discovered there was a lien on the property by the previous owner. Guess who had to pay the lien? My client! If you purchase a property without doing a title search and there are liens on the property, then they become your liens and your responsibility to clear before you can sell the property.
In real estate contracts, the buyer OR seller can pay for the title insurance. Most of the time the seller pays for this insurance to provide assurance to the buyer that the property has a clear title. But it is always negotiable. The cost is set by the state at a rate of anywhere between .9% to .6% of the sales price. Typically, the higher the sales price, the lower the rate.
There are two types of title policies, Owner and Loan. If you take out a loan for a property, the lender will require coverage to protect their interest in the property for as long as you have a mortgage. The owner’s policy will protect you for as long as you or your heirs own the property as per Texas Department of Insurance.
The latest scam involving real estate is Seller Impersonation Fraud, says Joe Olivieri, where criminals are pretending to be owners of property and solicit the services of a real estate agent to sell “their” property. They typically choose properties that are vacant and properties where the tax mailing address is different than the property owner’s address.
I am the Broker/Owner of Emblem Properties Group in Huntsville, TX. Let me know if our company can ever be of service to you or just answer your real estate questions.