In real estate law, title insurance may be purchased by the buyer in a home sales transaction. Title insurance basically protects the buyer against losses if there is something in the property title that is lacking, insufficient, or inaccurate. Some title insurance documents also protect the sellers against misrepresentations or breaches of sales contracts by the buyer.
Title insurance allows the protected party to recover title insurance benefits if certain terms are breached. The exact nature of the coverage will vary in each situation. As in most real estate transactions, title insurance terms are usually fully negotiable to fit the needs of each party.
The most basic thing that title insurance does for buyers is that it helps protect against instances where the seller doesn’t actually have title to the land. If that happens, then obviously, title is never transfer to the buyer, and in effect, they don’t end up owning the land. This can happen both intentionally (for instance through fraud) or unintentionally (such as when the seller was never given valid title to begin with).
Title insurance can also protect against specific violations and breaches of sales contracts. This will all depend on the individual agreement between buyer, seller, and insurance companies.
The presence of a well-founded title insurance program can change the atmosphere of a sales negotiation from a less open one to a more cooperative one in which information is exchanged freely and openly. Title insurance issues can also come up during a title search, as a title search will usually indicate whether or not insurance was used during a particular transaction.
Title insurance is generally intended to prevent conflicts in a home sales transaction. However, it can sometimes be a source of conflict between the buyer and seller, or between the insured and the insurer. Disputes over title insurance can be minimized by having a lawyer present during negotiations. This includes negotiations both for the sale of the home, as well as negotiations when finalizing an insurance package.
A common dispute over title insurance is over what the insurance will cover. Some insurance policies don’t actually cover the entire home sales. Instead, some title insurance packages only protect against certain legal issues, such as the existence of a lien on the home. Thus, it’s important to know exactly what your title insurance will cover.
Also, since home sales almost always involve a mortgage, the title insurance can involve both the mortgage borrower and the mortgage lender. You will want to ensure that you understand how the title insurance will affect your interaction with a mortgage company, if at all.
As you might be able to tell, title insurance can sometimes be a complicated aspect of a home sale. It’s always in your best interests to hire a real estate lawyer and work closely with them when negotiating and finalizing a title insurance arrangement. Your attorney can help you finalize the agreement so that it is fair for all parties involved. Also, your lawyer can assist you in court if you need to participate in a lawsuit over title insurance.