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.

I Still Have Credit

In recent years, credit line loans were very popular.  Often called a HELOC, or Home Equity Line of Credit, lenders would allow home owners to have a ‘line’ for up to 125% of the value of their home.  Once popular because some considered it to be an emergency fund, the use only when needed money.  And when making payments, you only paid on the money you have accessed, like a credit card.  During the recent economic times, most lenders have made it difficult, yet not impossible, to open new credit lines, using real property as collateral.

Once a person sells their property and pays off this loan, it is to be closed down completely so no access for funds may ever be made again.  Some have slipped through the cracks, as you would suspect.

Imagine, you sold your home 3 year ago and suddenly get checks in the mail with a letter saying you have funds available.  Hot diggy dog, lets go shopping…… and not pay the bill, because we sold that house.  Scary, but true,  it happens.  The good thing?  You as the new buyer have Owners Title Insurance that protects you so it isn’t YOU that has to pay back those funds the prior owner accessed.

In the State of Virginia, a lender is required to release the lien against the property within 90 days of its payoff.  Title Concepts tracks every payoff we make, ensuring that each lien is properly released by the lender, which in turns gives your clients the peace of mind knowing their property is secure.

Contact us for more information on how we can help you have a smoother closing tomorrow.

Why Have Owners Title Insurance?

I do many closings each week. Some for refinances, some for purchases . I enjoy meeting each and every person. I enjoy educating them on the things that they need to know and listening to them tell me all about how this is the house they have been searching for when they are buying. Rarely do I talk about the bad things that may have come up, or the stories of bad things I have heard.

As I sat at a closing awaiting the arrival of the Realtor, the buyer and I began to chit chat