For millions of people, homeownership is the American Dream. Sadly, for many people, the American Dream can quickly become an American nightmare. It can happen if the market takes a downturn, your home turns out to be a “money pit,” or even a natural disaster can be the culprit (especially in Florida). For some Florida homeowners, however, lack of clear title not only creates headaches of epic proportions but also threatens their biggest financial investment. That’s why it’s important to get title insurance.
Simply put, title insurance is a policy that protects you from any unknown claims made to the ownership of your home. This basically means you won’t have to worry about losing your home if the last owner didn’t pay his or her taxes, or if an unpaid contractor put a lien on it. For that matter, you’ll also have some piece of mind if it turns out that there’s an easement on the property, or if someone related to a former owner now claims the house was sold without his or her permission.
Another benefit associated with this type of insurance is that you don’t need to make annual or quarterly payments. Instead, there is a one-time fee that varies based on several factors including the cost and location of your home, the type of policy you choose, and the extent of the coverage. Once you render payment, the insurance affords the specified protection as long as the property remains in your family.
Your payment will also be used to fund the title search conducted by the title insurance company during escrow. This comprehensive search is done to ensure that there aren’t any existing claims (such as those we noted above) on the home. Title insurance is then provided to ensure you’re covered in case the search didn’t identify any and all outstanding claims.
More likely than not, you will need a mortgage to finance your home. If this is the case, you’ll have to get what is known as a lender’s title insurance policy, which will cover the bank or lender in case their mortgage is invalidated or other “clouds” on title make the mortgage null & void. In other words, the policy may ensure that the lender is paid if you lose title to the home because of any existing issues when the home is purchased. However, title insurance won’t reimburse you for past payments made, including your down payment, and it doesn’t automatically allow you to stay in your new home.
Here at Loshak Leach LLP, our knowledgeable real estate attorneys highly recommend that you also buy an owner’s title policy. This type of policy covers you the home buyer, rather than the lender, and generally provides coverage “up to the purchase price of your home.” This means that the insurance company will pay up to the purchase price of the home (if required) to protect your ownership.
Another thing to keep in mind is that you have limited opportunities to buy title insurance. Generally, the best time to purchase a policy is at closing, which is mandatory if you are obtaining financing to make the purchase. Whether you’ll have to foot the bill for both the lender’s policy and the owner’s policy depends on applicable laws and practices. In any case, both policies generally go into effect on closing day.
Clearly, this is a basic introduction to title insurance. If you are considering buying a home in Miami, Fort Lauderdale, Palm Beach, or anywhere in South Florida, or are currently in the process of doing so and want to learn more about title insurance, related laws, and how they may affect you, contact us today.
Loshak Leach LLP is a full-service real estate law firm and title agent for Old Republic Title Insurance Company. Call us now at (954) 334-1122 to find out how we can facilitate all your Florida real estate transactions from start to finish.