WHY TITLE INSURANCE IS SO IMPORTANT
The most risky and costly part of buying a house is finding a title defect. Title defects arise when there are tax liens, judgments, restrictions or easements that limit the use of the property. In order to buy a real estate it is crucial to obtain a Title Search on the property that will reveal any of those encumbrances. Usually, Title Abstractors are the ones to perform the Title Search before the real estate closing.
Despite the time and expertise that goes into a Title Exam, even the most thorough search cannot absolutely assure that there are no “hidden title defects.” In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search. Such title defects may leave the Buyer with an unpleasant and costly surprise, or even worse, the Buyer may lose his house and be left with financial obligations to the Lender.
For example, if a prior owner incorrectly stated his marital status, the other spouse will have a right to claim interest in the property. Another common title defect is when a grantor was not competent to sign the deed or the deed was not correctly executed. South Carolina requires signatures of two witnesses and a notary in order to convey the property. If the signature of a witness is missing the conveyance is invalid. Other hidden title defects include fraud, forgery, defective deeds, or clerical errors. All these hidden defects can arise after the Buyer purchased his home and may jeopardize his ownership.
The only way to protect the ownership is to get Title Insurance. Title insurance is crucial for both, the homebuyer and the Lender. If the property is financed, the Lender will usually require a Title Search and to obtain Title Insurance before providing a Buyer with a home loan. This is the only way for Lenders to protect their own financial interests in the property.
For the Buyer, Title insurance is a protection against personal loss or damage due to potential problems with title. By obtaining Title Insurance the Buyer invests in a long term “piece of mind” that the newly purchased home is free of any encumbrances, liens, judgments, and other title defects.
Even though the risk of loss is extensive, the Buyers, unlike Lenders, are not required to obtain Title Insurance. At every real estate closing table the Buyer would hear an attorney say “Title Insurance is optional,” and despite an attorneys advice some Buyers waive Title Insurance.
So, what exactly can Title Insurance can do for the Buyer? Title insurance is responsible for paying legal costs when it is necessary to defend the Buyer against any lawsuit attacking his title. Title Insurance will also pay to clear up the title problems or pay for the Buyer’s loss.
Title Insurance is, in fact, very affordable. It is a one-time payment that is usually collected at the time of the closing, but it remains in effect as long as the Buyer and his heirs have interest in the property.
If owning a home is important to you, Title Insurance is an investment in your piece of mind that you and your heirs will have unencumbered interest in the property.