What Every Realtor Should Know About Title Insurance
Make sure your clients are protected!
The process of buying a home is complicated. Your clients may be confused and frustrated with the mounds of paperwork and documents they sign. Fees mount and buyers are eager to save their money for post-closing expenses like new furniture.
Title insurance is one of those charges little understood by homebuyers, who often see it as just another fee they have to pay to buy their home. As a trusted advisor to your clients, you can help them understand the value that an Owner’s Policy of title insurance provides, and the dangers that can be incurred without it.
Advising your clients against spending money on the Owner’s policy is not just against BHHS policy, doing so could subject you to legal action and a damaged reputation in the event they experience a title problem that an Owner’s Policy covers and communicate that “no one told them”. When purchasing real estate, your clients are free to select their own title insurance agent. You can also make a recommendation and encourage your clients to use Trident knowing that they will be working with the title insurance industry leader.
Any time your consumer wants to “save” money on title insurance, we recommend that you refer them to your Trident Land Title partner so that we can explain the benefits of purchasing Owner’s coverage from a financially secure title insurance underwriter. Together, you and Trident can protect your clients and provide them with a great real estate closing experience. The final result is a satisfied, protected customer who is likely to refer others to you!
Title insurance protects against problems affecting the title to a home. There are two types of title insurance policies. A Lender’s Policy protects only the lender’s interests in the property. An Owner’s Policy protects your client if a covered title problem arises after they buy their home. A title insurance claim is serious, and a loss means your client’s homeownership is threatened. The Owner’s Policy offers protection against ownership challenges and undiscovered issues that could limit a buyer’s use of the property. With an Owner’s Policy the cost of claim defense and legal fees are paid by the title insurer, not the homeowner.
A client buys new construction from the builder, who didn’t fully pay the roofer. Wanting to be paid, the roofer files a lien against the property right before settlement, and the lien does not show up on the title commitment or bringdown. Without an Owner’s Policy protection, your client is responsible for paying this debt—meaning they are paying the roofer instead of buying new living room furniture.
Other examples of title issues that an Owner’s Policy protects against include:
- Errors or omissions in deeds, wills or trusts
- Missed easements that allow construction of a road or utility line, or other recorded conditions that reduce your buyer’s use of their property
- Deed with a forged signature, resulting in no transfer of ownership to your client
- An unknown heir of a previous owner who is claiming ownership of the property
- Title transfers under an expired, invalid or forged power of attorney
- Missed liens in the underlying title examination, including judgments, unpaid mortgages, property taxes or child support liens
- Mistakes in the public records
When purchasing an Owner’s Policy the buyer pays a one-time premium at the time of settlement that continues as long as they, or their heirs, own the property. The cost of the Owner’s Policy is marginal when a lender’s policy is also being issued. Known as a “simultaneous issue” discount, the buyer does not pay full premium for the Owner’s and Lender’s policies.