Buying More Than Title Insurance: 3 Factors to Consider
Buying real estate isn’t always a transparent transaction, as much as all parties concerned are committed to that end.
That’s why the one-time purchase of title insurance is important. Lenders require the buyer to pay for their title insurance coverage, so that should tell you how important it is.
But lenders don’t require buyers to buy their own coverage. That decision is squarely on your shoulders.
Why Buy Title Insurance
That means it protects you from deed forgery, a line of credit on your property that the previous seller never closed out but decided to use, unpaid contractor liens, taxes, and much more.
Although your local Staunton or Waynesboro title insurance company will do a thorough title search to make sure the title is “clean,” the title company cannot find what isn’t recorded such as fraudulent activity, mistakes in descriptions, adverse possession, etc.
What’s more, here's what Jeremy Yohe, spokesman for the American Land Title Association, a Washington DC based trade association has to say about title searches:
“One out of every three searches reveals a title or public record defect that’s fixed before the transaction closes.
That’s why purchasing title insurance is so important. As thorough as a reputable title company is in its title search, it can’t find fraudulent activity!
Just like house insurance, you hope you never have to use it. But when you make the one time title insurance purchase, it’s there if you need it.
What’s equally important to buying title insurance is the company you work with. Ask these questions to make sure you choose wisely.
“Are title insurance prices regulated?”
In many states including Virginia, title insurance prices are regulated. That means there won’t be much of a difference in prices. As a savvy consumer, you want to look at two other factors instead:
- The quality of the insurance
- The quality of the title search
So ask about the complete transaction price, not just the cost to buy the title insurance.
Secondly, make sure the title company or the attorney you’re working with will do a thorough search.
And, make sure the underwriter has a good reputation. You want to be sure the company will still be around in 10-15 years, in case there is a problem.
To verify that the underwriter of your policy is sound, check its financial solvency ratings with companies such as Demotech Inc, Fitch Ratings, or A.M. Best Co.
Ask your lender or your state insurance department if you live in a regulated or cost-regulated area. Costs for the latter can be 10% or 20% more.
“How much coverage do I need?”
Typical title insurance policies cover fraud, forgery, undisclosed heir and spousal claims. Additional coverage would be more. For example, if you’re buying a home newly constructed in a subdivision, additional insurance to cover a restriction endorsement would be more.
This policy would protect you if the construction of your home was found to violate the restrictions of your subdivision.
In another instance, your lender might require more title insurance. If you are financing your home with an adjustable rate mortgage (ARM), the endorsement will guarantee that the lender receives repayment first before the home goes into foreclosure.
“Who usually pays for title insurance?”
There is title insurance coverage for both the buyer and the lender. If you’re buying both from the same company, sometimes there is a significant discount. Check with your title insurance company for their policies in this matter.
“Is the seller pushing a particular title company?”
If you’re paying for your title insurance, you have the right to choose the company you work with. But if the seller is pushing for the title company he or she used when they bought the property, beware.
Using the same company could yield the same results. Often, searchers aren’t using actual records but the extracts or summaries of those records.
Having a different company perform the search could unearth problems, which would allow you to fix those problems before you buy.
For quality title insurance and settlement services, talk to Lilly Title & Settlement. We serve Staunton, Waynesboro, and Augusta County. Learn more here: www.lillytitle.com.