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Buying a new home can be overwhelming, and once you’ve finally found the right one, closing is still a complex process. In addition to that, few buyers are aware of basic terms—and even fewer specifics.

Aspects of title insurance can mean the difference between a pleasing transaction resulting in ownership of a new home—or financial ruin.

What exactly is title insurance?

Title insurance is a contract used to reimburse loss or damage due to problems concerning the ownership of property, including title defects, undisclosed heirs, liens against the property, and more.

But before a title insurance policy can ever be issued, there is one crucial step:

The Title Search

A title search is the very first step in the real estate closing process.

A title searchis an examination of all available documents pertaining to the history, ownership, and financial condition of a property to identify any inconsistencies that could result in a loss. The examination includes any records the title search company can get their hands on, including reports on possession, name searches, chains of title, and tax searches.

Once identified, some of these issues can be resolved. Others can delay the sale. And in some cases, unresolved problems will never make it to the closing table.

Even the most thorough title search can fail to uncover a variety of issues.

That’s where your title insurance policy comes in.

Lender’s Policy

A lender’s policy is required by mortgage companies for them to issue a mortgage loan. The policy will cover the bank or lender for any legal fees or loss of payment due to issues with the title. You can see why lenders require this insurance.

Unfortunately, it will not protect the buyer’s personal finances.

That is what an owner’s policy is for.

Owner’s Policy

In the unlikely—but very possible—occurrence of a problem with title after the closing of a real estate transaction, an owner’s policy is the last line of defense for the buyer.

The owner’s policy will insure reimbursement for financial loss to the buyer in the event of a post-purchase complication with the title. In some cases, an owner’s policy might make it possible for the buyer to retain full ownership of the property.

As complex and overwhelming as it might seem, the entire real estate closing process can be relatively pain-free. Familiarizing yourself with the process is the main key.

However, the best way to decrease the worry that goes along with a real estate closing is to have a professional by your side. If you are looking to buy or sell and need assistance, don’t hesitate to contact us today.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: Cosmetic or Structural? Which Improvement Is Better for Your Home’s Value?

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