As a real estate lawyer, I often come across clients who are excited about purchasing their dream home or investment property. They have done their due diligence, completed inspections, and secured financing. However, one crucial aspect that many homebuyers overlook is protecting their investment through owner’s title insurance. Unfortunately, many see title insurance as an unnecessary expense.
You may be wondering, what is owner’s title insurance, and why is it an important investment? Let’s dive into the details.
Imagine this scenario: You have found the perfect property, negotiated a fair price, and are ready to close the deal. The excitement builds as you envision creating memories in your new home or reaping the rewards of a profitable investment. But what if, after the purchase, you discover that the property has hidden liens, unpaid taxes, or even claims from previous owners?
This is where owner’s title insurance plays a vital role. It provides protection against financial loss due to title defects or undisclosed claims on the property that existed before the purchase. While it may not be a legal requirement, it is an essential safeguard that every purchaser should consider.
Is a Title Search Enough?
One common misconception is that a thorough title search conducted by a qualified attorney is sufficient protection. While a title search is a crucial step in the buying process, it is not foolproof. Title issues can arise even after a diligent search has been performed. For example, what if the seller actually sold the property to a third party hours before they closed on their sale to you. The first transaction would not be recorded in time for your closing attorney to have discovered it. Without owner’s title insurance, you could be left with hefty legal expenses and potential loss of your investment.
Examples of What Title Insurance Might Cover (Please Verify in Your Commitment Before You Close)
So, in what situations would owner’s title insurance be valuable? Let’s explore just a few scenarios:
- Hidden Liens: Liens are legal claims against a property that can arise from unpaid debts, outstanding taxes, or contractor disputes. Without owner’s title insurance, you may be responsible for resolving these liens and paying off the debt, even if you were not aware of them at the time of purchase.
- Forged Documents: Unfortunately, cases of fraudulent activity in real estate transactions are not unheard of, and they won’t always be found by the closing attorney. Owner’s title insurance can protect you if someone forges a signature, misrepresents their ownership, or fraudulently transfers the property to another party.
- Unknown Heirs: In some cases, the previous owner may have passed away, leaving the property without a clear title. Without owner’s title insurance, you could find yourself entangled in a legal battle with unknown heirs, potentially leading to delays, financial loss, or even loss of the property.
- Boundary Disputes: Property boundaries can be a source of contention between neighbors. If a dispute arises after your purchase, owner’s title insurance sometimes covers the legal costs associated with resolving the issue and defending your property rights. However, most closing attorneys in Georgia will not insure against encroachments if you do not have a recent survey, and therefore it’s important to ask whether your closing attorney will remove the survey exception from your title policy.
- Mechanics’ Liens: If a contractor or subcontractor has not been paid for work done on the property, they may file a mechanics’ lien up to ninety days after they last provided labor. What this means is that your closing attorney may not know about a mechanics’ lien, meaning it won’t show up on a title search. Without owner’s title insurance, you could be held responsible for paying these outstanding debts, even if you were not aware of them.
These are just a few examples of situations where owner’s title insurance can provide invaluable protection. It is important to note that owner’s title insurance is a one-time payment made at the time of closing, typically based on the property’s purchase price. This small investment can save you from significant financial loss and stress down the road.
Choose a Competent Attorney
When choosing owner’s title insurance, it is wise to work with a closing attorney who writes title insurance policies through a reputable title insurance company. Also, it’s important to ask for a title commitment before closing so that you can know exactly what your policy will cover before you close on the transaction. Your attorney should be able to guide you through the process, explain the policy coverage, and ensure you have adequate protection for your specific situation.
Be a Smart Purchaser
In conclusion, owner’s title insurance is a valuable safeguard that protects your investment and provides peace of mind. It shields you from unforeseen title defects, hidden liens, and other potential issues that could jeopardize your property rights. Don’t overlook this essential aspect of the homebuying process – make sure you secure owner’s title insurance and protect your investment from day one. As a caveat, title insurance does not necessarily cover every risk, and therefore you must review your policy to determine exactly what is covered. As examples only, title insurance does not generally insure you against losses related to zoning issues. It also does not insure anything related to the condition of the property, and it does not insure against unrecorded easements or matters that can be seen by visual inspection.
At Bryant & O’Connor Law Firm, we understand the importance of owner’s title insurance. Our team of experienced real estate attorneys is here to guide you through the process, answer your questions, and ensure your investment is protected. Contact us today to learn more about how we can assist you in securing owner’s title insurance and navigating all aspects of your real estate transaction.
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