The Importance of Title Insurance in Buying a Home

When you purchase real estate in Florida, you want to make sure you’re getting title to the property free and clear of any hidden or unknown claims. This is true whether you’re buying a house, a condo, a commercial parcel or even an undeveloped piece of land. Such a claim could come in various forms, from a bank lien to unpaid property taxes. This is why title insurance is an essential part of a real estate transaction.

Title insurance actually comes in two forms: one policy for the purchaser and one for the mortgage lender. Unless you’re buying real estate as a cash deal, you’ll have a bank or other lender that needs to have its collateral protected. While Florida law doesn’t require home buyers to purchase title insurance, lenders do. In almost all cases, you can’t get a mortgage loan unless you pay for a lender’s title insurance policy.

Even though title insurance is optional for the buyer, it is risky to proceed without it. Most of the time, real estate is transferred from the seller to the buyer without incident. A title company or a real estate lawyer who offers title services will discover any defects when they perform a title search. The defects are cured and any liens on the property are paid off or otherwise discharged at or prior to the closing. However, there is always a chance that a title search won’t uncover a problem. In the relatively rare event a title defect is discovered after closing, dealing with it can be costly unless you are insured.

Title defects can take many forms. For example:

• A previous homeowner didn’t pay their property taxes, causing the state tax authority to place a lien on the property.
• A prior owner failed to pay a contractor for a renovation project, prompting the contractor to file a lien on the property.
• A past homeowner allegedly left the property to an adult child who couldn’t be located at the time of the homeowner’s passing. If the adult child resurfaces down the road, this could create a problem with the title.

When problems like these arise after the property has changed hands, the title insurer is bound to defend the owner and/or lender and, if necessary, payout on any legitimate claims. This holds the insured harmless against all out-of-pocket expenses, including attorneys’ fees.

While title insurance is an added cost in the home-buying process, it’s a small price to pay for the security of knowing you’ve acquired full ownership rights. You can enjoy your property without having to worry about some previously unknown claim popping up unexpectedly.