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Title Insurance – What is It and Should You Buy It?

One of the biggest expenses on the buy side of a real estate transaction is title insurance. Many of the buyers I represent in and around Fairfax County are surprised to see it on their side of the ledger, and they are equally surprised at how expensive it is. To put it simply, title insurance guarantees the secure transfer of property from one owner to the next. It is meant to protect an owner’s or a lender’s financial interest in real property against loss due to title defects, liens, or other matters.

The best example I always use when explaining title insurance is this: Owners of a property are going through a messy divorce. The husband forges the wife’s name on the sales contract, the transfer of deed, and all other pertinent closing documents. Four years roll along, and you really enjoy living in your home and community. One day out of the blue, you get a knock on the door. It is the now ex-wife and previous owner informing you that she never signed any documents, and that she still owns the home that you have been living in for the last four years.

If you bought title insurance, all you need to do is call the title company that provided you the title insurance at closing. That’s it. You are done! It is now the sole responsibility for the title company to work with that ex – wife. You are completely free to get right back to enjoying your home and life.

But imagine the nightmare scenario if you did not get the insurance. Your first call will be to a real estate attorney. That attorney is going to want to get paid for her services as this is a messy and lengthy process to go back and correct a problem like this. It is very expensive, and will also take an extreme emotional toll on the family as well.

There are many other ways that after the fact impediments on title can occur as well. Documents not being properly recorded at the courthouse; contractors who have done work on the property but have not been paid; a previous real estate closing where the attorney did not properly release prior liens from loans that have been paid in full are just a few of the examples that will need to be corrected.

I always insist that my clients get title insurance. The odds are that you will never need it. But the peace of mind that comes from a clean and marketable title on your home is absolutely money well and wisely spent.

Mike Shearer
Associate Broker
Keller Williams Realty, CDPE, SFR, IMSD
Proudly Serving VA, MD, & D.C.

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