Title Insurance

Title insurance protects against any future claims that may jeopardize the clear title and ownership of the buyer. Any liens, judgments, or other claims against the seller must be resolved at (or before) the closing. If these items are not all discovered and eliminated, the lienholders may retain rights to the property - in essence, the buyer inherits the legal problems of the seller.

This is where title insurance comes in. The title company performs a search, an inspection of public records and deeds, to indentify any problems prior to the closing. After completing the search - and receiving verification that any outstanding matters are resolved - the title company writes an insurance policy that protects against anything that may have been missed. If any unexpected claims arise in the future, the insurance company must correct these or pay off on the policy.

Some title insurance policies cover the lender only (no lender will close a loan without title insurance). So if you want your equity to be protected as well, you need to make sure this is included. This is well worth the marginal extra cost, particularly if there is substantial equity in the property.