During a real estate transaction, expenses can add up quickly for a buyer. There’s the earnest money, home inspection, down payment, closing costs, and the cost of moving. This is why many buyers will skip getting owner’s title insurance.
It’s important, though, before you say no to owner’s title insurance, you understand what you’re giving up. Before you refuse owner’s title insurance, be sure you don’t fall for these common myths.
Myth Number #1: I’m getting lender’s title insurance.
One common misconception is that lender’s title insurance is owner’s title insurance. That’s actually not the case. Lender’s title insurance protects a mortgage company and owner’s title insurance protects a homeowner.
When you get a loan, you’ll be required to get lender’s title insurance. The lender’s title insurance protects a mortgage company for the amount of the mortgage and only lasts as long as there is a loan on the property.
Owner’s title insurance is what protects you. It’s a one-time premium paid at closing that protects you as long as you or your heirs own the property. When you buy owner’s title insurance in conjunction with a loan policy, you’ll also be given a significant discount on the premium. Owner’s title insurance will protect you against clerical errors, fraud, and other issues that affect your ownership and enjoyment of the property.
Myth Number #2: The home is brand new, so I don’t need it.
Even when a home is new, the land where the home is built has still been owned by many people over the years. The age of the home has nothing to do with potential issues that could arise over ownership of the home. That’s why you’ll still need owner’s title insurance when you buy a brand-new home.
In addition, owning a new home comes with other potential issues. Things like easements, restrictions, HOA liens, mechanic’s liens, among other things could all affect your ownership interest and use of a property.
Myth Number #3: The sellers owned it for many years, so there’s nothing to worry about.
You may improperly assume that if a home has been in a family for a long time, there are automatically no issues. The amount of time a home has been owned has no bearing on whether or not it can come with title issues.
A home that has been in a family for a long time can still come with its share of estate disputes, liens, unpaid taxes, and other title defects. Don’t fool yourself into believing that a long history ownership guarantees safety. The only way to protect yourself against the unknown is an owner’s title insurance policy.
Myth Number #4: You don’t need it when you buy a lot.
You may not think that you need owner’s title insurance when you buy a lot, but you do. A lot purchase isn’t nearly as much as buying a home, but it’s still a financial investment.
Lot purchases can still come with just as many issues as home purchases. When you’re spending money on that lot, you want to make sure that your investment is protected. Lots can still come with many issues including boundary disputes, the discovery of prior interests in wills or estates, and unpaid property taxes.
Regardless of what you’re buying, purchasing a home or land is something that you’re still spending money on. You’ll want to make sure that your investment is protected.
Myth Number #5: I’m okay because there was a title search done.
When you purchase a home in Knoxville, a title search is completed. Typically, a 30-year search is done to ensure that a seller is able to convey clear title to a property.
A title search will examine the chain of title, the legal description, check for judgments and liens, and make sure taxes are paid, among many other things. Based on that, a title company will issue a commitment that they are able to issue title insurance.
Even with the most thorough title search, things can be missed. This is why owner’s title insurance is so important. Owner’s title insurance protects against things that may have been missed in the title search.
In addition, there are also other things that a title search may not find. If a previous seller may have committed fraud, a title search will not show this. Owner’s title insurance protects you against the unknown.
Are you in the process of buying or selling a home in the Knoxville area? Title Group would love to assist you in any way possible. You can reach us at 865-392-5801 or via email at orders@titlegroupoftn.com.
Title Group of Tennessee is a full-service Knoxville title company. We specialize in Knox, Sevier, Loudon, Blount, Jefferson, and surrounding counties. Title Group of Tennessee is ALTA Best Practices Certified since September 30, 2015.