Intitled: The Truth About Title Insurance

There is an increasing number of advertisements for services that protect property owners from becoming victims of a crime called “title fraud” or “title theft.” The truth is, the crime isn’t new. But the rise of businesses who have figured out how to make money by selling services claiming to protect people from it is fairly recent. You may have seen or heard commercials featuring celebrity endorsers for companies that will “help you protect your home” for a monthly, annual or multi-year fee. The ads are compelling, and the crime is real; but there are important things to know before signing up for a title protection service.

What is “title” anyway?
The concept of “title” as it applies to property ownership is even confusing to seasoned homeowners. In real estate, “title” refers to the rights to a piece of property. With single family homes, the title applies to the structure and the land it sits on. In multi-unit properties like condominiums, the owner’s title refers to the space inside the walls of a specific unit. Being “in title” proves you have the right to use, borrow against and sell whatever type of property you have.

What’s Title Insurance?
Few people relish buying any kind of insurance, but most people are glad to have it when they need it. Title insurance is confusing because it covers a right rather than a physical item. When property is sold, title gets conveyed from a seller to a buyer. Seems simple; but before a buyer can take title, the seller must prove that s/he has the legal right to give it & that’s where title insurance comes in.

Protecting the Bank and Protecting the Buyer
There are two types of title insurance: a lender’s policy to protect the bank or mortgage company and an owner’s policy that protects the buyer. In direct contrast to other types of insurance, title insurance protects against the past rather than the future. The title company ensures that you have received your property rights legally at the time of purchase. It may seem surprising that conventional title insurance policies do not protect you against someone fraudulently getting a mortgage on your home or similar criminal activity after you purchase it – or even pay off your mortgage.

The Bottom Line
The bottom line is, property title issues are often extremely costly due to the size of the claims and the legal fees required to fight and clear them, and they can result in financial damage that extends far beyond the value of the property in question. Before determining whether a property title protection company can help you make sure you research any prospective companies first before signing up. You want to ensure you are not providing information to an organization and become a victim of the fraud you are trying to prevent.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.