What is Title Search and Title Insurance?

Learn more about the title search process and the purpose of title insurance. Here is why you may need it when owning a home.

The Starting Line

What is the difference between title search and title insurance? Can you purchase title insurance after closing? Learn more about why you may need it and how to buy it when owning a home.

What is a title search?

A title search is conducted during the closing process in order to ensure that all records related to the property, as well as debts guaranteed by the property, have been properly prepared, satisfied, and recorded. A title report is subsequently prepared and issued to outline the resulting findings. 

The purpose of a home title search is to ensure that the property can change hands during the sale without any discrepancies, errors, or fraudulent omissions endangering the satisfactory completion of the sale and subsequent ownership.

What information is included in a title search?

A title search will look at all of the following:

  1. Chain of title from owner to owner all the way to the original land grant or sale
  2. Satisfaction of liens, financial claims made against the property for the payment of debts
  3. Errors, omissions, forgery of documents, fraud, and other accidental or purposeful errors that could impact your claim to ownership.
  4. Easements, abatements, encroachments, encumbrances and records that could call into question the ownership terms of the property
  5. Other title problems -- called “clouds on the title -- that could create subsequent questions of ownership, fraud, or the validity of the sale. These could include building permits, structural damage, and faulty surveys.

How long is a title search valid?

The short answer is, a title search is valid until new information arises that call its results into question. For example, a title search could be conducted which shows a clear chain of title. However, this could be complicated by the subsequent discovery of an additional will, deed of sale, or other documentation that calls the original finding into question.

How is a title search conducted?

A title search uses public records, legal judgements, property lien search, and a site inspection to determine whether the property in question has a clear chain of title and is free of any encroachments or other physical issues which would call into question the ownership of the property.

What is title insurance? Do I need title insurance?

Sometimes referred to as owner’s or buyers title insurance, title insurance offers protection after the sale against subsequent claims of ownership, including the legal and financial ramifications of such a claim. 

Title insurance is considered important enough by lenders that it is mandatory for financed homes. A lenders title insurance policy will be purchased and added to the closing cost statement in order to protect the lender’s financial interest in the property from subsequent claims or questions of ownership. 

What does a title company do?

Title companies perform a variety of services during the real estate transaction. These may include:

  1. Conducting the title search and investigating discrepancies in order to clear the title for the transfer of ownership
  2. Issuing title insurance policies on behalf of the lender and the owner, as required
  3. Many title companies maintain and facilitate escrow accounts on behalf of buyers and sellers during the closing process
  4. Title companies often provide closing services facilitated by one of their settlement agents. These agents provide information about documents related to the closing process and provide necessary documents.

How long is title insurance good for?

For lenders, title insurance lasts for the terms of the mortgage loan in order to protect the lenders financial stake in the property. For buyers, owner’s title insurance is good for the life of their ownership stake in the property.

Can I buy title insurance after closing?

Yes, you can buy title insurance after closing, but this option has risks attached to it. Should a new issue arise that was not identified in the title search prior to closing, you may be hard pressed to buy title insurance after closing.

What is the difference between home insurance and title insurance?

Homeowner’s insurance protects your home from a variety of potential damages, losses, or liabilities that can arise in regards to your property. By contrast, a title insurance policy relates to the ownership and legal questions surrounding the title deed and ownership, not to physical aspects of the property.

Do I need title insurance and what does the title insurance process look like...

On a new construction home?

While the house may be new, the land it’s built on is not, and chain of ownership questions can apply to the property itself or to the previous dwelling, which will now revert to your home.

If I pay cash?

If you are lucky enough to pay cash for your home, you will not be required to pay the mandatory lenders title insurance, since there is no mortgage or lender involved. In addition, you will save on closing costs since many of them are related to the acquisition of a mortgage. 

In many cases you will still want to purchase a title insurance policy to protect your stake in the home, especially since you have the most to lose from a discrepancy in title and the resulting legal issues that arise.

What is the average cost of title insurance and how is it calculated?

The cost of title insurance varies by state and by the financing on the home. There are two title insurance policies in question: 

  1. A lenders title insurance policy, which costs around $500 and protects the lender’s interest in the property in the event of a title challenge 
  2. An owners title insurance policy, which costs around $800-900 as a one-time payment that is good for the life of the property’s ownership. 

Who pays title insurance cost?

In most markets, the seller pays the cost of title insurance. This is a way of reassuring the buyer and their lender that purchase of the home -- as well as any subsequent work, loans, liens, or other financial transactions related to the home -- were properly paid and handled by the seller, and that the buyer will have a clear right to the property.

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