Enhanced Title Insurance - Who Needs It?
Why have title insurance in the first place? Because it protects one of the most important investments you will ever make...your home or investment in real estate! And because your lender will require it.
When preparing for your real estate closing, the closing agent will conduct a "title search", which means that they search the courthouse records for the chain of title on the property you are purchasing. Some of the things they look for include:
- Any outstanding liens or judgments on the property
- Any unpaid taxes, special assessments or homeowners association charges
- Zoning violations
- Mistakes in any recorded documents
- Forged or improper information on deeds, releases or wills
- Any undisclosed heirs
Because your lender is providing the money for your purchase, they want to be sure that the property is free of encumbrances.
There are two main types of Title Insurance:
- Lender's (or Loan) Policy - This policy is issued in the amount of the loan and protects the lender's interest in the property in case of any problem or defect with the title. This coverage is typically paid for by the seller of the property as part of giving the new buyer a clear title. One exception to this will be in the purchase of new construction. Most builders don't like to pay title insurance, so when you are considering the purchase of a brand new home, be prepared for this extra expense. This policy does not protect the buyer.
- Owner's Policy - This policy provides protection for and is usually paid for by the homebuyer. I always ask for a "simultaneous issue" because the title company will provide this coverage for a very small one-time fee if it is purchased at the time of closing. The normal cost will be in the $35-$50 range. This policy will protect the buyer for as long as they (or their heirs) own the property...and will pay any legal fees involved in defending the claim.
What is an "Enhanced Policy"? And why do I ask for one in the purchase contract?
Because as your Exclusive Buyer's Agent, I want to provide all the protection I can to my homebuyer clients! Here are some of the additional benefits of having an enhanced policy:
- Value added protection - The policy amount automatically increases (over 5 years) up to 150% of the original policy.
- Post policy coverage - In the event of any liens being placed on the property after the policy is issued due to unpaid labor and materials not authorized by the homeowner, adverse possession or forgery.
- Additional insured - Provides coverage for anyone who inherits title from the insured, including a spouse who might be awarded title in a divorce or the beneficiaries of the trust after death of the insured.
- Zoning Law violations - Coverage in the event that the land was not properly zoned.
- Encroachments - Coverage in case the homeowner is forced to remove existing structures which were located on the property at the time of policy issue...but encroach onto a neighbor's property. Also provides protection in the event a neighbor builds a structure (other than a fence) on the homeowner's property after the policy is issued.
- Easements - Provides coverage if the homeowner is required to remove existing structures because they encroach into an easement or setback line. Also provides for any damage caused by use or maintenance of an easement.
- Water and Mineral Rights damage - Coverage for damage to existing improvements and landscaping due to exercise of existing mineral rights.
There are more benefits (and also some restrictions) on the enhanced policies, but certainly worth the effort. The cost is minimal compared to the potential cost of any claims that could arise. Be sure to consider this type of coverage when you purchase your next home.
Pam Rumley is a veteran real estate broker in the Nashville, TN area. She is a true Exclusive Buyer's Agent, which means that her office never takes listings. This fact assures that there is never a conflict of interest regarding your real estate transaction. You can be assured of receiving 100% of her attention and loyalty - 100% of the time!
For more information, visit her comprehensive website http://www.NashvilleRealEstateAuthority.com Be sure to check out her "Real Estate University" section, where you will find more informative articles on a variety of topics concerning homebuying.