What Is Title Insurance & Why Do I Need It

What Is Title Insurance & Why Do I Need It

Buying a piece of real estate can be incredibly exciting. It can also be overwhelming, complete with obscure legal terms and unanticipated expenses. For example, your lawyer may recommend that you buy title insurance – but you may not even know what it is.

Title insurance is a special type of insurance policy that protects your ownership interest in your home. In Florida, a title insurance policy for the lender is required if you are financing the purchase of the property. Even if you don’t need a mortgage, it is a good idea to buy title insurance for yourself so that you are covered if someone makes a claim on your property.

Lopez Law Group offers full-service real estate services in the Tampa-St. Petersburg region. We handle all aspects of both commercial and residential real estate agreements, from preparing deeds to the final closing to handling any disputes that may arise. Reach out today to learn more about how we can help you buy or sell a property in Florida. 

What Is Title Insurance?

When you buy a piece of property, you take title to the real estate. The title refers to ownership of something (such as a car title). When you hold title to a home, you have legal rights, ownership control, and responsibility for the property. For real estate, the title is transferred by deed.

Prior to closing, your attorney or another company will perform a title search. During this process, they will be looking through all available public records for prior ownership. This process ensures that the title has passed correctly to each new owner and that there are no liens, utility assessments, taxes, judgments, home equity lines of credit, or anything else that may affect your ownership interest.

If the title search shows any “clouds” on the title, the seller will need to clear (resolve) them before closing. Otherwise, they cannot pass a clean title to the buyer – and the buyer may be able to back out of the purchase. After all, no one wants to buy a piece of property and later learns that there is a lien or mortgage on it.

Title searches are very thorough, but they can still miss certain issues – such as a fraudulent or forged prior deed, an incorrect name, or another flaw in the title. Title insurance protects against the defective or invalid title or legal claims against the title. It is a specific type of insurance that covers a buyer, legally and financially, from any claims against the title that arose before they owned the property.

There are two types of title insurance. Lenders can obtain (or require) a title insurance policy to protect their interests in the event of a claim against the property. Owners can also purchase a title insurance policy to protect against any flaws in the title. 

This type of insurance requires a one-time payment to protect you for as long as you own the property. Florida law governs the issuance of title insurance, along with the contracts for these policies.

Do I Need Title Insurance?

Whether you are buying a home, an investment property, or a piece of commercial real estate, you should absolutely purchase title insurance. In Florida, title insurance for the lender is required when two parties enter into a contract for real estate that involves a lender. Even if you aren’t taking out a mortgage, your residential real estate attorney will likely recommend that you buy title insurance.

Title insurance protects you in a number of different ways. If you discover a lien against your property, the insurance policy will cover the costs of paying it off. If someone claims that they have a right to your property and files a quiet title action against you, this policy will cover the costs of defending the lawsuit. 

These types of policies can also provide a cash settlement if you discover that your deed was forged and you do not actually own the home. Without title insurance, you may be stuck paying the mortgage for a piece of property that someone else owns. With title insurance, you can get paid for the cost of the home – and find a different place to buy.  A lender’s title insurance policy will also protect you in this situation: instead of going after you for not paying your mortgage, the bank can file a claim with the title insurance company to get the money that it is owed.

Finally, title insurance protects you in the future when you sell your property. If the buyers’  commercial real estate lawyer finds a problem during the title search, your policy will cover the costs of clearing the title so that you can move forward with the sale.

Title insurance is relatively inexpensive. It is usually based on the purchase price for the owner, and the loan amount for the lender. Both policies together may cost between 0.5% to 1.0% of the purchase price of the property. For a $500,000 home, the cost of title insurance may be $2,500 to $5,000. That is a significant amount of money, but it is a smart way to protect a much larger investment.

Full-Service Real Estate Services in St. Petersburg, Florida

When you buy a piece of real estate, you want to make sure that every aspect of the transaction goes smoothly. After all, it may be the biggest purchase you ever make in your life. Buying title insurance is one of the most cost-effective ways to protect your investment.

The Lopez Law Group can help you throughout the process of buying or selling residential or commercial real estate. We understand how important this purchase is to you, and will work hard to protect your interests. To learn more or to schedule a consultation with a St. Petersburg real estate lawyer, give us a call at 727-933-0015 or fill out our online contact form.