Pay attention buyers: title insurance is a vital requirement whenever you purchase a new land property.
Insurance is a part of life. From car insurance to life insurance, it is ubiquitous in the United States. Title insurance helps you protect against hidden financial hazards that may threaten your financial investment in a property or home. When you purchase a new property, you are essentially buying the title to the land; the right to occupy and use a space.
Bob Gordon, a real estate broker with Re/Max Alliance in Boulder, CO, says title insurance is a vital form of protection for buyers. “Insurance is a standard facet of a real estate transaction. It protects the property buyer, guaranteeing [that a] free and clear title be passed from seller to buyer.” Owning a property title normally means owners have the right to use the land as they choose, but without the right insurance landowners may face pitfalls with a new acquisition. Problems may include incorrect official documents, easement issues, forged signatures, unknown heirs, and/or other legal difficulties for either of the parties in question.
Title insurance may act as a security measure that can help prospective buyers combat ownership claims, such as those that might result from a boundary dispute or other land usage issues. According to Shane Fischer, an Attorney at Law from Orlando, title insurance on a property is not dissimilar to the liability insurance for a vehicle. “You want to buy title to protect yourself should someone come around after your close and claim you are on their land. The title insurance will pay them off. [This is the] same reason you buy liability insurance for your car.”
Title insurance also makes it easier to secure loans for a property. Many mortgage lenders will only deal with owners who have title insurance. Greg Cook is a mortgage consultant for the First Home Buyers Network with over 30 years of experience. Greg states that if buyers need additional financing, “title insurance will be required by the lender to protect their lien position.” As a result, both lenders and property owners are given some peace of mind regarding their investment. Greg Cook goes on to advise that title insurance is also beneficial because it helps those who are purchasing land avoid a break in ownership, which may make it difficult for the property to be resold. In this way, title insurance acts as an important security feature that prospective land owners should look into carefully when they are in the buying process.
Athena Paquette, mortgage broker, financial consultant and real estate investment coach, tells a tale of a new closing gone wrong to the tune of over $100k. “I had a client who told me about a ‘great deal’ they received on a home they purchased in Palos Verdes. The sellers ‘wanted out’ and sold the house for only $100,000 when it was worth $550,000. The sellers needed a fast close, and it was such a good deal, that the clients paid cash. A year later however, the happy buyers discovered there were IRS liens, a judgment, and a loan against the property!”
“The seller had assured them that the property only had a small loan. They went to an escrow company to make it official, but the escrow just had them sign the deed transferring the property in their name. Since they were recorded as the owners, they were responsible for all the liens. They had no recourse, and lost their $100k and the property.”
Don’t fall into the same trap! At Land Rush Now, we only sell properties with title insurance. To learn more, check out this post from Athena on title insurance.
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