Capital Title | A Shaddock Company

Let’s talk about your business issue ​972-200-0462

Premiere business and title legal services

Why is title insurance important for real estate buyers?

On Behalf of | Jul 15, 2022 | Real Estate Law

Those investing in real estate, especially first-time homeowners, often experience sticker shock when they first get their settlement statement. The amount of money due at closing will usually be thousands of dollars more than the amount they offered to pay for their house.

Especially when someone offers the maximum amount of money that they can finance to purchase the property, the closing costs may leave them scrambling to come up with thousands of dollars in just a few weeks.

Buyers trying to handle this unexpected financial stress may look over their documents carefully and start to question why they have not one but two title insurance policies included in the paperwork. Why are there two title insurance premiums required, and why is title coverage so important?

Title insurance protects your investment from future claims

When you purchase a property, what you technically buy is the legal right of ownership. You record the deed that you execute with the county, and local government authorities will maintain a record of your ownership. If someone else later shows up and claims to have a right to title, you could end up embroiled in expensive title litigation. In the worst-case scenario, you could potentially lose your ownership of the property to the person bringing the claim.

Title insurance protects you by paying for a lawyer to represent you in a title claim scenario. It also protects you by reimbursing you for your financial losses if you eventually lose the right to the property. Purchasing title insurance also helps protect you because the title search process may uncover blemishes that would lead to issues later, allowing you to resolve them before you assume possession of the property.

You can only walk away from your own protection

When you finance the purchase of a property, you have to meet the lender’s requirements for the transaction. You have a firm obligation to protect their investments by paying for the lender’s title insurance policy. You can potentially forgo your own coverage, but that would leave your down payment and your financial investments in improving the property at risk if there is ever a claim in the future.

Understanding how title insurance protects you will help you understand why paying those premiums now is so important to you as a homeowner.