Title insurance is essential for protecting both buyers and sellers in real estate transactions. Nonetheless, there are several myths and misconceptions about title insurance that can cause misunderstandings. We'll debunk some of the most widespread misconceptions about title insurance in this blog article and provide information that every real estate investor needs to be aware of.

5 Myths On Title Insurance

Myth 1: Homeowners Insurance And Title Insurance Are The Same

There is no way that this myth is more untrue. Both the lender's investment and the buyer's right to ownership are safeguarded by title insurance. Your house is protected against structural loss or damage by homeowner's insurance.

"Title is the legal right to use or own property, and title insurance protects you from legal challenges to your title," according to First American. It is not the same as homeowners insurance, which guards against potential future losses to property from natural disasters like storms and fires.

Title insurance protects your property against potential concealed issues of ownership that may have existed in the past.

Myth 2: Expensive Monthly Payments

In reality, title insurance is a one-time cost paid at closing when you purchase or refinance real estate. There aren't any yearly or monthly fees.

In terms of price, it is pretty affordable. It represents a tiny portion of your property's cost. The best thing about it, though, is that it provides you with the assurance you need to know that your property is shielded from any potential legal challenges to your ownership. That is valuable!

Myth 3: Complete Protection Is Not Guaranteed 

The protection that title insurance provides is one of the key reasons it is so vital for property owners.

According to First American, an owner's title insurance policy can cover anywhere from 10 to 33 different title issues that could affect your ownership, depending on the type of policy. If the policy includes defense costs, the title insurance provider will pay for the expenses associated with defending your title in court. 

Some people might probably think that insurance is not that important. After all, what could go wrong?

Well, here are some examples to think by:

• The property you bought could not be legally yours due to fraud.
• If they never signed a deed to transfer the property, someone else might still be able to claim ownership of it. This might occur if a married couple previously owned your property, but one of them neglected to sign the deed at the time of sale.
• Liens, such as unpaid taxes or a child support judgment against a previous owner of the property, could be placed against your property. Even if a lien is for a previous owner's obligation, it remains attached to the property until the debt is settled, which causes issues for subsequent owners.
• Inaccuracies in the documents could impact your future selling prospects. Your deed might not have been properly witnessed or notarized, for instance.

Myth 4: There Is Only One Type Of Title Insurance

Did you know that title insurance comes in two varieties? An owner's title insurance coverage is the first. The owner(s) of the property and their ownership rights are safeguarded by this policy. The title insurance policy held by a lender is the second.

This kind of insurance, which is in force until the mortgage is paid in full, protects the lender who is making the loan. Both are very significant and fulfill specific roles.

Myth 5: Home Buyers Cannot Choose Their Title Company

This is one of those urban legends that we always hear. Buyers are typically free to select the title company they wish to work for. They frequently rely on advice from their agent, lender, or friends and relatives. "The accepted practice in the real estate industry is for the buyer to submit an offer to purchase a property, either alone or through an agent," according to Best Lawyers Magazine.

Selecting a title company is up to the buyer. However, the seller may reject the buyer's suggestion and offer a different one if the seller or the agent acting on their behalf is uncomfortable with the title firm the buyer has chosen or has strong feelings about where the closing should take place.

Choosing a title company that can handle your particular needs, is trustworthy, knowledgeable about the ins and outs of the real estate market, and is committed to going above and beyond for its clients is crucial. If you need help with title services, our team at IndyLegal is here to guide you!

Call us at 317-214-6023 so we can assist you!