First, a history lesson! In the early 1800s, there was no title insurance, it was up to the buyer to do the research and make sure that the person they were buying the title from was actually the owner, and that there were no liens or other past heirs that might have any claim over the title of the property. If they were incorrect and someone else were to sue them for the property, they bore sole responsibility for proving they were the rightful owner in court, including all the expenses there of. In 1868 there was a case by the name of Watson V. Muirhead, where a seller was given false information by a lawyer and told the buyer that the title was clear. When the buyer was then informed that there was a lien on the property from before he purchased the title, he sued. However, the courts ruled that when given false information from a professional, the seller was not responsible, and thus a precedent was born for title insurance. In 1874 Pennsylvania passed an act that allowed for title insurance to be purchased to protect title ownership.
Okay, enough with the dates! With all of that information thrown at you, I'd like to break it down and really put it into clear language. Before you purchase title insurance, a title professional will throughly search documents that span over a long period of the properties history to make sure that there are no liens on the property, for example, if a former contractor has a claim that they did work that was never fully paid for. They also look for any mistakes or forgeries in the past paperwork, making sure there is a clear line of ownership, and that there are no missing heirs from past owners that may make a claim to the property. However, about 1/3 of title searches miss something, and that is the key reason behind why title insurance is a must have for buying a property. If something in the future comes up, your title insurance protects you from all costs dealing with fighting in court for the title, for the entire time that you OR your heirs own the property.
Now, before you go and purchase your title insurance, there are a few things to keep in mind. Does the state you are purchasing in have regulated pricing for title insurance companies? If so, there are some questions to ask and some information to look for. It is still possible to price match even when the prices may be fixed, because there could be other processing fees involved before the final price is reached. Sometimes that price can be a 20% difference when comparing companies. Do your local research to find a fit thats best for your needs.
You will also need to know how much coverage you will need, most cases being a standard basic coverage. There are other more comprehensive options, but those are mostly for commercial property purchases. Do you know who is purchasing the title insurance? Sometimes, if you're paying for both the buyers and sellers title insurance you can get certain discounts for doing so. You also have the right to select your own title company, so never let someone tell you that you have to go with a particular company.
And as always, your realtor can give you any advice you may need, and if you have uncertainties, they should help make you feel confident in every aspect of your purchase. I hope this helped explain a little bit more and provide clarity to you in the business of buying a home. Happy buying!
~ Kelly Cranmer Valadez
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