Your clients will come with many questions. In addition to your knowledge of the real estate market in your area, they will also want to know the ins and outs of purchasing a home.
Title insurance can seem like a necessary evil. You know your clients will need it to get through the purchase, but if you have never had to deal with a title claim, it can be challenging to discuss what title insurance does.
Here are a few tips for discussing the purpose of title insurance as you take your clients through the home-buying process.
Who buys it, and what does it do?
Often, first-time home buyers know a few terms about the process but may now know what applies to them and what they need to do about the information. There are two types of title insurance, insurance for the borrower (buyer) to protect their lender and insurance for the seller to protect the buyer’s equity in the home. The most common type is “lender’s title insurance” purchased by the buyer.
Since the title reflects those who have an ownership claim on the house, it is essential to have a clear title when it is time to sell. A basic title insurance policy will protect your client’s lender from issues such as:
- Inaccurate records
- Undisclosed (or unrecorded) easements
- Other claims on ownership
- Outstanding liens or lawsuits
If the seller cannot transfer ownership to your buyer, the title insurance will protect their lender against any loss they suffer. It is important to inform your client that they purchase title insurance to cover their lender; it typically does not directly protect the buyer.
What about title searches?
Your client will likely ask about the need for title insurance if the title company has already conducted a title search. While it does not happen often, there are times when one title search will miss an important flaw in the title that could impact the purchase of the home. Although these situations are rare, the consequences can be devastatingly expensive without the appropriate coverage.