The amount that home buyers pay at closing is usually thousands of dollars more than the price they’ve initially offered. Buyers typically need to cover various closing costs. One of the biggest line items on a closing settlement statement is often the title insurance policy.
Homebuyers often need to pay for a policy that covers the lender financing their mortgage and a policy protecting them as the new owner of the property. Buyers can decline coverage for themselves but generally have an obligation to pay for a policy that protects their lender.
What value do people derive from a buyer’s title policy?
Protection during a title dispute
If another party claims to have an ownership interest in real property, the matter might go to court. The spouse of a prior owner or heirs who should have inherited from an estate are among those who might try to assert that they have title rights to a property.
Title insurance can support those dealing with an active title dispute. The policy can pay for the cost of legal representation. Having an attorney respond to title claims can increase the odds of owners successfully defending their investments.
If the courts eventually determine that the outside party does have an interest in the property, then title insurance becomes even more valuable. It can reimburse the owner for the equity that they lost, including the value of their down payment and the cost of any improvements they have made to the property since gaining possession. Title insurance can make it possible to rebuild after unexpectedly losing a residence due to unforeseen complications.
Making sense of the closing costs collected in a real estate transaction can help buyers proceed with confidence and protect the interests of those facing a real estate dispute. Title insurance may be costly, but in the rare case that it is necessary, buyers are usually grateful to have it.