What is Title Insurance and Why Do You Need It?
If you have conducted a real estate closing recently, or are planning to close a real estate transaction in the future, title insurance will be an important step. Whether you are buying property with borrowed money or with cash, it is crucial not only to have title insurance, but also to know exactly what protections title insurance provides.
Once you have selected an attorney to handle your closing, that attorney will then conduct a title search to determine title ownership and any other matters affecting the property title. Items that may affect title include easements, restrictions, rights of way and judgment liens. Generally, closings are conducted smoothly with no mistakes and with the assurance that title is clear. However, even the most thorough search will not reveal “hidden defects” not shown on the public records. Such defects may be problems caused by a clerical error, confusion over names, forgery, or numerous other possible problems. Careful attorneys can not reasonably be expected to discover title problems that are not revealed in the public records. Therefore, the examining attorney is not responsible to you for dealing with these issues when they arise after closing. Without title insurance, you are on your own!
Title insurance policies will continue to insure the owner of real estate for as long as he or she owns the property. But what protections will title insurance provide? Title insurance will protect your investment by paying claims arising from errors in title examination and recordings, and will even pay for losses from defects not of record. Additionally, title insurance will also pay for the legal expenses necessary to eliminate any title defects.
The risks covered under title insurance policies can range from the simple to the complex. Some examples of the risks covered by title insurance include incorrect information in deeds, such as names, signatures or legal descriptions. Even claims of ownership by third parties and invalid deeds due to forgery are risks that a title insurance policy will cover.
So why is title insurance needed? Changes in land ownership requiring formal transfers of title involve risks that title may be defective and title insurance can protect against real estate title losses. The simple answer may come down to the fact that oftentimes it’s better to be safe than sorry.
The law office of Ferguson, Scabrough, Hayes, Hawkins & DeMay, PLLC is not a title insurance agency and does not issue title insurance policies. For direct answers to your title insurance needs, contact your local title insurance companies.
For more answers to your real estate questions, contact the attorneys at Ferguson, Scabrough, Hayes, Hawkins & DeMay, PLLC.
Ryan C. Hawkins is a partner at Ferguson, Hayes, Hawkins & DeMay, PLLC and a member of the Real Property Section of the North Carolina Bar Association.