Before we go into why you need title insurance, we will first establish what it is. If you are new to buying property don’t feel bad if you have never heard of it. Simply put, if you are buying a home, title insurance is a means to guard you financially if there are problems (or defects) with the property’s title. This can come in the following two forms:
- Lender’s Title Insurance – The borrower obtains title insurance to protect the lender.
- Owner’s Title Insurance – This covers the homeowner should anyone make a claim on the property from before it was purchased.
Why Would Such A Claim Happen?
There are several reasons as to why someone could make a claim on your property—and this will play into the importance of title insurance.
Someone might make a claim against your home based on back taxes that were not paid from before you bought the property. Another reason is that there could be a lien on the property. If the previous owner still owed money to creditors, then those same creditors might have the legal ability to take the property. They would do this instead of money that was owed to them but hadn’t been paid.
Another possibility is that someone may claim the property was given to them in a will. Or perhaps there is an ongoing legal dispute regarding who owns the property because of an ambiguous will.
Title Insurance Protections (Owner’s Policy)
Despite how much you researched the title of your new property to ensure that it was “clean,” there are several things that could surface months (and sometimes years) after you buy a piece of property.
With title insurance, you are protecting yourself from claims against your home that were likely out of your ability to control. There could have been documents that were not executed correctly, forgeries, and even impersonations. When entering into a common real estate transaction, you are assuming the sellers are who they say they are and that they own the property you are attempting to buy.
Just because that scenario is unlikely, that doesn’t mean it couldn’t happen. Essentially, you want to ensure that the property goes from the seller to the buyer (you) without someone trying to take it from you after-the-fact.
A key piece of title insurance, and one that can be misinterpreted by people who are buying property for the first time, is that it doesn’t protect you from losing your home for something you have done. For example, title insurance will not prevent your home from being seized if a lien is placed on it because of your debts, and it will have no bearing if you fail to pay the lender for your mortgage.
Auricchio Law Offices
We represent clients throughout Chicagoland and Northwest Indiana. In Illinois, this includes Cook, Lake, McHenry, Dupage, Kane and Will Counties. In Indiana, coverage includes Lake and Porter Counties. We are a value-driven firm who are committed to providing the finest legal services for you when closing on a commercial or residential property. Contact Auricchio Law Offices to schedule your free 15-minute initial telephone consultation to learn how we can help.
Auricchio Law Offices
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