Many home buyers can be left a bit confused when it comes to the home title and obtaining title insurance. In other words, what the heck do title companies really do and why should I buy title insurance?

A title company’s sole purpose is to ensure that a property title is clean and legitimate. What does that mean? A title company makes sure that the individual who is selling the property is indeed the rightful owner of the land and its buildings. The title company will research everything having to do with the property before the closing, including any outstanding liens, back debts, unpaid taxes, legally registered owners, and more. If the title company finds problems, it can delay the closing until the issues are resolved.

Maintaining the escrow account is another important job the title company provides. Escrow is where a homeowner deposits the money needed to be released to the seller on the day of closing.

Although it’s rare for a title company to miss any problems that exist with a property’s title, there’s always the remote possibility that an important issue managed to go undetected. In my book, Keep Calm…It’s Just Real Estate, I list no less than 21 possible mishaps. Again, most are rare and you shouldn’t worry that this is going to happen to you. Nevertheless, it’s important to know there are risks when checking on a home’s title.

The good news is that title insurance will protect you from issues that may crop up. For instance, say a home seller has recently divorced but forged the signature of the spouse and therefore did not have the right to sell the home to you. What do you do if the aggrieved spouse shows up on your doorstep asking for the house? Let’s not even think about what the cost of attorneys’ fees could amount to due to a legal battle like that. Title insurance is your best friend and will help reduce your risk and potential for loss due to unforeseen events.

Now to the cost of title insurance. If a homeowner were to pay the national average and live in the home for just five years, then the cost of a title insurance policy would amount to less than $200 a year. To my way of thinking, that peace of mind over your property title is worth the investment.

This was the eleventh article based on my book Keep Calm…It’s just Real Estate. My friends at eCommission and I have one more installment to share so I hope you will stay tuned!

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