When you take title to a piece of property, it means that you are the legal owner. Title insurance protects both lenders and real estate owners from property loss or damage that relates to defects, liens, encumbrances or title clouds. Owner’s title insurance is a low, one-time fee based on the value of your home. With a home being one of the largest investments you’ll ever make, it’s clear why getting owner’s title insurance is such a smart way to give yourself peace of mind.
While most people never have to file a title claim, but real estate professionals can tell you about stories they have experienced or heard second-hand.
So, what exactly does title insurance cover and why is it worth the premium? Title policies vary state-to-state, but generally, standard title insurance helps cover the following:
- Forgery – Forged deeds have been on the rise and are used to sell a home or property. Title insurance can help protect you against prior forgeries on the property, such as showing that a lien was released when it was not.
- Lack of competency, legal authority or capacity to sign – If a property is conveyed by a minor or someone who is not competent to sign legal documents, title insurance offers the necessary protection to guard you against other heirs or legal owners that may stake their legal claim in the property.
- Undisclosed but prior record mortgage or lien – It is not common, but sometimes property record searches do not disclose all outstanding liens. In cases such as these, it is the title company’s responsibility to uncover any outstanding liens or private mortgages and make these known before closing. Title insurance helps protect against these types of outstanding issues.
- Undisclosed but recorded use restriction or easement – If the title company fails to disclose an easement or property restriction, which can limit what you do with your property, you can fall back on title insurance. Some policies are limited, as the restriction or easement must negatively affect the value of property.
- Inaccurate legal descriptions – An inaccurate legal description can convey the wrong parcel or lot, which means that you are not the legal owner.
- Lack of access – If there is no legal access to the property via a recorded easement, it could be considered landlocked. Title insurance can help pay for the costs associated with obtaining an easement on the neighboring land. Some states prohibit any piece of land from being landlocked.
- Deed recorded incorrectly – If a deed is not recorded correctly and through an error from the title company, you are not the legal owner, title insurance will help offset necessary legal expenses.
- Wills Not Properly Probated – If a will is not properly probated, an estate that includes real property could be sold illegally. This can give heirs certain legal rights. Title insurance helps to protect against any probate oversights, giving buyers the necessary peace of mind that their transaction is covered.
Endorsements and additional coverages offer protection against advanced property issues that may arise. They cost more than a standard policy, but sometimes the additional insurance is worth it, especially for properties that are more complicated. Extended coverage may include, but is not limited to, adverse possession or prescriptive easements. This type of possession occurs when the property owner next to you starts to openly take care of or possess your property for an extended period. The length of time varies by state. However, many people do not realize that possession may include mowing, maintaining the property or trimming trees. Once the neighbor has maintained the property for the state-specified length of time, they have the right to possess the property. A form of adverse possession is also “squatter’s rights.”
These more detailed policies also cover incorrect surveys, buildings that encroach onto neighboring properties, silent liens and pre-existing violations of CC&Rs, zoning ordinances and subdivision laws.
Real estate is an excellent, albeit expensive investment. To ensure your investment is safe, read your title insurance policy thoroughly and ask any questions. At Longhorn Investments, our in-house title company, Excel Title, will be glad to assist with navigating the title process.
Having a good relationship with trusted hard money lenders is an important part of the real estate purchase process. Hard money lenders may have individual requirements for the types of title insurance that are necessary for specific properties. Texas real estate investors should protect their real estate investments by working with experienced professionals that can help guide them in making the right financial decisions.
ABOUT LONGHORN INVESTMENTS
Longhorn III Investments, LLC is a direct private lender offering short term acquisition and renovation capital to real estate investors for both residential and commercial assets. We operate in major metropolitan areas throughout Texas, Missouri, Indiana, and North Carolina.
Highlights of our loan program include:
– Up to 70% of ARV (after repair value)
– Finance up to 100% of cost
– Close in 3 – 5 business days
– No income requirements
– Streamlined, simple approval process
– No pre-payment penalty
Longhorn was formed in 2008 and has funded over 2,100 loans since inception. Our complementary businesses include a title company and real estate law practice operating out of our corporate office. Our wealth of experience puts us in the unique position of being able to help investors through all aspects of each transaction.