When buying a home, you may wonder about the true value of having title insurance. After all, the one-time cost of title insurance comes due at the time of closing on your property, when you’re likely already crunching numbers to understand each expense that arises and whether it’s worth it. And while lender’s title insurance is required, owner’s title insurance is often an option that you would want to consider as well to protect your investment in your new home.
In the past, we’ve talked at length about why title insurance is a worthwhile investment. Today, let’s look at title insurance from a different perspective: how much might it cost you if you didn’t get coverage? Here are some possible scenarios that could arise, situations that would directly impact your household’s bottom line if you don’t have title insurance.
Title insurance can protect your investment in your new home from unseen issues with your property’s ownership — skeletons hidden in the property’s past. Common title problems can emerge in forged signatures, old liens previous owners have on the property, encroachment problems, fraud, and even public records mistakes. But what is the real cost of these issues if you encounter them and don’t have title insurance? Here are some examples.
When you buy a home, it’s natural to assume it will be yours, in total, until you are ready for your next big move. Want to put in a fence? Done deal. Thinking about building a garage or expanding your kitchen? Fabulous. Yet some homebuyers have found out too late that there are encroachment issues with the property they bought. Sometimes it’s the result of a surveying error, which leaves you unable to make full use of the land to which you assumed you owned the rights. This can lead to big legal headaches and, in the end, could result in you not being able to put in that fence, or expand your kitchen, or construct that awesome three-car garage you dreamed of having.
Most of us have a pretty good handle on what we owe and to whom, but what if you suddenly got saddled with someone else’s unpaid debts? For many of us, such an unexpected expense could impact our ability to stay afloat financially and manage our own expenses. How does this happen? Say a previous owner hired a contractor to do some work, but the owner failed to pay his bill. Contractors can then place a lien on the property, even after a title search is performed. A new homeowner who doesn’t have title insurance protecting their investment could find they are actually held responsible for the contractor’s claim. Likewise, an unsuspecting and uncovered homebuyer could find they are responsible for overdue taxes from a previous owner, unpaid bills and more if they haven’t purchased an owner’s title insurance policy.
It’s a heartbreaking concept: imagine you found out you could lose your home to someone else claiming ownership, months or even years after purchasing it. This could happen in cases of fraud or forged signatures or even missing heirs. In addition, this could happen if someone sells a property they co-own with an individual without their consent and signature — someone who shows up later and claims ownership: perhaps a sibling or spouse. If they are rightful owners of the property and you don’t have owner’s title insurance, you could actually lose your home to the rightful owner. If you do have an owner’s title policy, you will be protected from that possibility.
When you take all of this into consideration: the possibilities of what could happen if you don’t have title insurance and all the hidden issues from which it protects you, it’s clear that title insurance provides valuable protection of your assets. The costs of not having coverage are potentially immense, ranging from the stress of dealing with confounding legal issues to losing your dream home. All things considered, when so much is at stake, it’s clear that title insurance provides tremendous value when you’re purchasing a property.