As with anything, there are those that know, and many more that think they do. We live in a different kind of world now, a place where information is everywhere, but we’re lacking context and nuance. This is not a knock on anyone as I’m sure we’re all guilty of “thinking we know”. But real estate is what I do, and title insurance is where I fit into that complex space, so I’m going to cover the top 3 myths that surround title insurance.
Fact: The title insurance industry is structured to minimize claims, because we are a risk-elimination industry. In a perfect world, we identify all matters that affect or potentially affect title, and work through each of them prior to closing so that the purchaser can obtain good and valuable title. But then there are matters that are not of record, also known as hidden defects, that can adversely affect title. Some examples are heirs not accounted for through a probate matter, deed and mortgage forgery, identity theft, falsified records etc., etc. When and if this happens, title insurance protects the homeowner’s right to that property.
Fact: I have been managing title operations for over 15 years and have over 40,000 closings under my belt. And I can assure you, that a large percentage of real estate transactions have title issues. Not a majority, but a large percentage nonetheless. These can include unreleased prior mortgages or judgments, incorrect legal descriptions, prior deeds missing marital status, incomplete probate cases, failure to probate property, missing witness/ notary acknowledgements, questionable and/ or pending foreclosure cases etc., etc. There are dozens upon dozens of examples that could technically diminish the value of real estate, if not for an objective third party performing the due diligence and issuing an insurance policy to support their work.
Fact: Title insurance offers homeowners protection for as long as they own the property, for a onetime payment, based on the amount of the insurance provided. For example, in Florida, a $200,000 home would require a one time payment of $1075 for an Owners Title Insurance Policy. That’s not a drop in the bucket, but if the Buyer owns that property for 10 years, it’s a little over $100 per year. It’s paid once, and the coverage lasts for as long as you own the home. I can’t think of another assurance that create similar coverage, and certainly not for such an important asset.