Why You Need Title Insurance When Buying A Home In Southwest Florida
Title insurance is a necessary part of any real estate transaction, but a lot of buyers aren’t clear on what protection it actually provides. In short, title insurance protects the lender and buyer against loss or damage in the event a defect in the title was not discovered during the sales process — and instead rears its ugly head sometime in the future.
Here’s how title insurance works when you buy a home in Southwest Florida.
A Title Search Is Performed
When you’re buying a home, the seller must be able to present a clean title in order to legally transfer the property to the buyer. A title search is usually performed by your closing attorney or a title company during the due diligence process.
The title search is performed using public records and legal documents. It looks for claims, liens, or judgments against the title, property taxes owed, outstanding loans on the property, and any other defects that would affect ownership of the property.
If any issues are found, and depending on their nature, you may decide to work with the seller to correct them. Or, you can cancel the contract. For example, if back taxes are owed, the seller may agree to pay them in order to clear the title. That’s an easy fix. If conflicting wills are found and the rightful heir cannot be determined, that’s a more complex issue that usually involves a lengthy court process.
Once the title search is complete and the title deemed clear, title insurance is issued by the escrow company or title company.
Why You Need Title Insurance
In short, because people, records, and record-keeping processes are imperfect. Even the most thorough title search conducted by an experienced professional can be flawed. Especially if documents were not executed properly or there was an error in recording or indexing the documents. Other defects may be due to missing signatures, fraud or impersonation, unrecorded easements, inaccurate surveys, disputed property lines, unsettled lawsuits, and more.
Unfortunately, it may be years until these errors are discovered, when the buyer suddenly finds themselves in the middle of a legal battle for the right to their home.
With owner’s title insurance, the title company will defend the homeowner in the event of a future dispute due to a title defect. This can include legal fees, court costs, and administrative costs associated with additional title searches.
As you can imagine, this can affect the lender as well. If the homeowner were to default on their mortgage due to a title defect, the lender could face significant financial loss. Lender’s title insurance protects the lender up to the mortgage amount should the buyer default due to a title defect.
Who Pays For Title Insurance
While it’s customary for the seller to pay for the owner’s title insurance, and for the buyer to pay the lender’s policy, in Florida it varies by county who pays for title insurance and chooses the title agency. As with many aspects of a real estate transaction, this is always negotiable! Your real estate agent will help guide you through the process and make recommendations for negotiations, a reputable title company, and the best policy.
The Link Team Can Help You Understand Title Insurance
We’ve been helping our buyers and sellers navigate title insurance for more than 30 years. We work closely with local, established title companies, and we can help you understand what to expect during the process to ensure your interests are protected and you only pay for what you need. Contact us to learn more and talk about your plans for buying or selling a home in Naples, Fort Myers, Bonita Springs, or Estero.