When youre buying a home title insurance is going to come up in conversation. Its one of the elements youll need for closing, but may not understand why its necessary. The easiest way to explain it is by looking at the search process. A houses Title begins with searching public records. No theyre not looking for long-lostrelatives. Rather theyre looking for specific information about when the land (or parcels of it) were transferred.

Forward into the Past

The title search starts in the present with the current owners deed and then works backward one owner at a time. As this quest continues, the search records each grantees name, any encumbrances, easements, and the size of the parcel they owned until the finally find the U.S. Patent. Sometimes this trail goes cold, which is when a title processor hunts through certificates of marriage, death and taxes.

Basic Title Insurance:

Once completed, next comes the Title Insurance policy. Realistically the lack of good documentation could cause problems to a new home-owner. The goal is safeguarding yourself (and the seller) you from possible errors (like a lien that wasnt found in the search, or unpaid contractor bills from a previous owner).

A basic title policy protects the owner from fraud, any mis-recorded information about the property, unpaid judgments on the property and guarantees clear title to the property. On the lenders end of the equation, the title insurance safeguards against unrecorded liens, easements and document defects/deficiencies.

To this basic title insurance plan other things can be added. For example, if youre concerned that the current owners of the property at any time had unresolved permit violations, you can buy extended title insurance to cover that contingency along with protection against living trusts and forgeries.

Paying for Title Insurance:

The responsible party for paying title insurance is typically denoted in the purchase offer. Frequently the buyer and seller split the cost to keep it more affordable for everyone. The good news is that the fee for Title insurance is a one time expense and remains in place until youve repaid your loan. Note however, that unlike property insurance, title insurance only applies to losses prior to the date of coverage stretching back to the patent.

Remember too that if you refinance your home, youll need a new search. That way the bank can identify any new liens and other potential issues.