Potential homebuyers conduct title searches because it is a means to determine legal ownership—which is an essential factor during a real estate transaction. The most free and unencumbered real property ownership is called “fee simple.” Under these circumstances, the owner is free to convey the property or leave it to their heirs without limitations.
You may have already accepted that purchasing title insurance protects you and your home. When compared to some of the high costs associated with buying a house, title insurance is relatively minor. However, even people who have purchased homes may have overlooked one detail regarding title insurance: There are two different types of policies. Before we go over the differences between owner’s and lender’s policies, we must clarify a few points.
Don’t Hold Out For “Perfect Title”
Although your real estate attorney will explain further, it is unlikely that the home you intend to buy comes with a perfect title. This is because government agencies can place zoning regulations on the property, or developers may include restrictions on the property.
What Are Title Defects?
These types of things cannot be found through a diligent title search. Examples of title defects include:
- Unknown heirs to the property
- Forged deeds (or any other relevant document)
Although these may not surface during a title search, title insurance companies are willing to assume the risk of those defects. If you close on a home and discover that it possesses a previously undisclosed defect, it can cost you money to rectify it. However, your insurance company can compensate you when you have title insurance.
Owner’s & Lender’s Policies
When you get a loan, a lender’s policy protects the lender’s interest in the home. However, as someone buying a house, you are more likely interested in the owner’s policy—which is optional in North Carolina (though strongly recommended). (It is important to note that closing attorneys are not affiliated with title insurance companies in NC.)
If they advise you to purchase title insurance, they believe it is in your interest to do so.) Buying a house will likely be one of the largest financial transactions of your life. An undisclosed defect could be financially devastating. Title insurance is meant to safeguard you from that scenario. These policies also last for as long as you own the property.
Speak With Lake Norman Real Estate Attorney
Upon doing a diligent title search, it may come back with several issues. However, these are things you can discuss with your attorney. You don’t want to assume risk without fully understanding its scope. At Thomas & Webber Law at the Lake, we are committed to getting you to the closing table. During that time, we focus on helping you gather all the information you need to make one of the most significant decisions of your life. Contact us today to schedule a consultation.
Thomas & Webber Law at the Lake
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