Post image for Is Title Insurance Just Another Junk Fee? Should Home Buyers Buy Their Own Policies?Title insurance. If you are taking out a mortgage to buy a home you will need to buy this insurance.

What is title insurance and what is the point of buying it? Many home buyers see title insurance as a junk fee, something you just need to pay in the process of buying a home.

Title insurance is actually insanely important to home buyers and lenders. This insurance is a way to assure that no one but you has a claim on your home.

Mortgage lenders require that borrowers buy such a policy to cover the lender. Borrowers may also buy an owner’s policy to cover themselves.

Title insurance is essentially a process, with the insurance policy being the end product. This process begins with a comprehensive search by title professionals to make sure a title is clear before a buyer closes. This includes reviewing public records for tax information, court judgments, deeds, encumbrances, easements, and access.

A survey showed that title problems arise in 1 out of every 4 real estate transactions. The most common problems encountered include:

  • Forged signatures in the chain of title
  • Recording errors
  • Unpaid real estate taxes and other recorded liens
  • Defective foreclosures and defective acknowledgments
  • Undiscosed easements and title claims by missing heirs and / or ex-spouses

Contrary to many home buyer’s beliefs, they are not the real buyer of title insurance. Title insurance agents, who receive commissions from the title insurance companies usually pick the insurer, no real shopping goes on.

Consumers pay one-time premiums for title insurance. An owner’s policy lasts as long as the borrower owns the house, but the lender policy must be repurchased each time a loan is refinanced, usually at a lower reissue rate.

The owner’s title insurance is bought by a purchaser of real estate. This policy ensures that the title being bought is legitimately owned by the seller and is not subject to any hidden liens or other defects.

This type of policy often covers only the purchase price of a property. Premiums can be paid by either the buyer or seller, depending on the result of negotiations during the sale.

When putting down hundreds of thousands of dollars on a home in the Santa Clara county it makes sense to know that the chain of title, the multiple transfers of grant deed between buyers and sellers, is clean and that there are no breaks in the chain.