Title insurance – what is it, and how does it work?
One of the most expensive items on your Boston condominium purchase closing statement is title insurance. If you’re getting a loan, the lender will require a policy on the loan. But you may not be required to purchase a homeowner’s policy. Should you skip it?
In a word, no. The owner’s title policy will protect you against future claims against the property. Though the title company does a search through public records prior to the closing, unexpected things can pop up. Without title insurance, you’re flying without a net.
But it’s easier to make a case for title insurance after you consider the various possible scenarios that can occur. You won’t want to be flying without the title insurance net if one of these things happens. Here are my top 10, courtesy of Chicago Title:
1. A deed or mortgage in the chain of title may have been forged.
2. The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.
3. Title transferred by an heir may be subject to a federal estate tax lien.
4. There may be a defect in the recording of a document upon which your title is dependent.
5. Claims constantly arise due to marital status and validity of divorces. Only title insurance protects against claims made by non-existent or divorced “wives” or “husbands.”
6. Someone may claim he or she has an easement over part of your property.
7. Title transferred by an heir may be subject to a federal estate tax lien.
8. The deed is apparently valid, but was actually delivered after the death of grantor or grantee, or without consent of grantor.
9. There may be “mechanics’ lien” claims (securing payment of contractors and material suppliers for improvements) which may attach without recorded notice.
10. Errors in tax records (mailing tax bill to wrong party resulting in tax sale, or crediting payment to wrong property).
You can expect title insurance and escrow fees to be approximately 1% of your purchase price.
Great article, explaining what a title company does, as well as why you should get title insurance.
By Alina Tugend, New York Times
Like most homebuyers, Debra Kling did not pay much attention to title insurance when she and her husband bought a home in Larchmont, N.Y., last year.
It was just part of the blizzard of papers they had to sign and the endless checks they had to write at closing.
She and her family moved in and all was well until her neighbor told her that they could not use most of the driveway they had assumed was theirs. Nor could she and her husband, Jeffrey Shaffer, build a basketball court for their 12-year-old son, Ricky, as they had promised they would when they moved from Manhattan.
It turns out that a decision in a 1987 lawsuit gave the neighbor the right to use the driveway – and took away that right from their house – but that was not disclosed by the seller or the real estate company, Ms. Kling said.
Nor did their title insurance company, Fidelity National Title, discover it, she said.
“If we had known this, we wouldn’t have bought the house,” Ms. Kling said.
So Ms. Kling, who is a law school graduate, decided to challenge the title company.
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