What Every REALTOR® Should Know About Title Insurance

Make sure your clients are protected

The process of buying a home has gotten pretty complicated, with mounds of paperwork and documents to sign. Fees show up at closing that can sometimes be a big surprise to the buyer, who often has no idea what they’re for.

Title insurance is one of those charges little understood by home buyers, who often see it as just another fee they have to pay to buy a home. As an important advisor to your clients, you can help them understand the value that title insurance provides, and the dangers that can be incurred without it.

Title insurance protects against problems affecting the title to a home, which is probably your client’s most valuable asset. There are two types of title insurance policies. A Loan Policy is almost always required by the lender and insures the title for the amount of the mortgage loan. An Owner’s Policy, on the other hand, insures the homeowner’s investment, such as their down payment and equity. Both are needed.

Having a problem with a title can seem rather remote because, historically, the title insurance industry has not had to pay a large amount in claims. This is due to the exhaustive due diligence work that is performed by the title company prior to closing. The American Land Title Association estimates that one out of every four title searches reveals a problem with the title.

Because of the corrective work that title professionals perform, most buyers are unaware of these problems and the closing goes smoothly. Few problems with title ever end up resulting in a claim. However, when it happens, not having the proper protection can be devastating to a homeowner.

Some title problems are easy to detect, such as prior tax liens or a lien from an unpaid subcontractor. But other problems can be more difficult to detect, such as forged signatures in the chain of title, recording errors, undisclosed easements or title claims by missing heirs or ex-spouses. For this reason, having both a Loan Policy and Owner’s Policy ensures that your clients are fully protected.

Relieving the Stress of Home-Buying

One of the interesting things I see as a closing agent is the stress the buyers can be under with all of the things they shouldn’t do between the time they write a contract to the time they get to the closing table. This should be a joyous occasion. Owning your piece of America. But the stress they feel can be alleviated easily with the right approach, a good loan office and a smart Realtor.

Ensuring you have a team behind you that knows how to explain things really makes a huge difference. But many buyers fall into the excitement pitfalls that can happen when buying a home. Some things to you should remember are:

1. Don’t make any BIG Purchases. Excitement of window treatments, new furniture, wall hangings, and whatever else you need to make your house a home can be exciting and you want to run out and buy it all. But running up those credit cards, or draining your savings account can be a hit to your credit and reserve funds the lender may need you to have for the closing.

2. Paperwork. Yeah, we all get tired of signing the pile of documents, but ensuring they are all done in a timely manner can allow things to happen on time, and happen smoother. Getting documents the lender needs quickly lets them process the loan faster. In turn will help the loan get full approved faster so we can close on time.

3. Inspection Repairs. Sometimes during home inspection, you find items needed to be corrected. Your Realtor will request these items be taken care of. But be sure to monitor the progress of theses items. Sometimes they can cause a delay in the closing if not completed on time, or not completed properly. Using licensed contractors is very important for certain repairs. Your Realtor will guide you in the right direction.

4. Closing Costs. Most Realtors and Loan Officers have a really good grip on the fees the market will allow. So don’t get sticker shock when it comes to closing time. Shop around, it never hurts to get second or third opinions from a different title company than who your Realtor or lender may suggest. But remember, you the consumer have the right to close the title company doing your closing. But also remember, cheaper isn’t always better.