Title insurance plays a vital role in safeguarding homeowners against a variety of potential title issues that could arise during or after the purchase process.
While the insurance itself provides coverage, many times issues affecting a property are discovered and documented during the title search, examination, and commitment stages. These all happen prior to closing on the property and it is critical that a buyer, their agent, and/or attorney carefully review these items to verify what does and does not impact the title prior to closing.
Here are some common title issues and how title insurance can help mitigate these risks:
1. Liens
Liens are legal claims against a property that arise from unpaid debts or obligations. Common types of liens include mortgage liens, tax liens, and mechanic’s liens. If a previous owner failed to satisfy a debt or obligation related to the property, the lienholder may have a claim against the property, potentially clouding the title.
How Title Insurance Helps: Title insurance provides protection against losses resulting from undisclosed liens on the property. If a lien is discovered after the purchase, the title insurance policy covers the cost of resolving the lien, including legal fees and potential financial liabilities.
2. Encroachments
Encroachments occur when a structure or improvement on one property extends beyond the property line and onto an adjacent property. Encroachments can lead to disputes between property owners and may affect the marketability and value of the affected properties.
How Title Insurance Helps: Title insurance helps mitigate the risk of encroachments by conducting a thorough examination of property records and surveys to identify any encroachment issues prior to the purchase. If an encroachment is discovered after the purchase, the title insurance policy may cover the cost of resolving the issue, such as negotiating an easement or relocating the encroaching structure.
3. Boundary Disputes
Boundary disputes arise when there is uncertainty or disagreement about the location of property lines between adjacent landowners. Boundary disputes can escalate into costly legal battles and may result in restrictions on land use or ownership rights.
How Title Insurance Helps: Title insurance may help protect homeowners against losses resulting from boundary disputes by providing coverage for legal expenses incurred in resolving the dispute. Additionally, title insurance policies often include provisions for survey coverage, which can help clarify property boundaries and prevent disputes from arising.
Conclusion
Title issues such as liens, encroachments, and boundary disputes can pose significant risks to homeownership and property investment. Title insurance serves as a crucial safeguard against these risks by providing financial protection and legal assistance in the event of a title issue. By understanding common title issues and the protections afforded by title insurance, homeowners can enjoy greater peace of mind knowing that their ownership rights are secure. When purchasing a home, investing in title insurance is a wise decision that can help protect your investment for years to come. Get a free instant estimate using our Title Insurance Calculator!
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