If you have ever purchased a home or investigated a possible piece of real estate for purchase, then you have likely encountered title insurance. Title insurance is a basic component of most real estate purchase in the United States and something that many parties agree to without a second thought.
For this reason, many real estate purchasers and sellers never look extensively into what title insurance means, or what guarantees or assurances it provides. While most owners hopefully will never have to deal with a dispute where title insurance becomes an issue, understanding what the insurance is can help you better protect your real estate investment.
Title Insurance in Bonney Lake
Title insurance takes two forms: owner’s insurance and lender’s insurance. Both types are a form of indemnity insurance that protects you against any unknown claims to the property that you are buying. Basically, title insurance is a confirmation that your title to your property is clean and that, in the event some sort of competing claim or issue should arise, your financial investment in the property will be protected.
Owner’s title insurance takes various forms but most standard insurance agreements cover the purchase price in the property so that, in the event you lose the title, you recover your investment. Owner’s insurance policies can also provide enhanced coverage for things like inflation or mechanic’s liens that may be asserted against your property.
Lender’s insurance protects the lender from financial risk as well. Again, in the event there is an issue with the title, lender’s insurance makes sure that at least the existing mortgage on the property is paid off so that the bank does not lose money on your home or piece of land.
Title insurance is different from mortgage insurance or home insurance. It does not protect your physical property in the event of a disaster, robbery or other unforeseen event. Rather, it protects your claim of ownership over the real property that you have.
Why Is Title Insurance Important?
Having clean title to a piece of property means that there are no competing individuals with known claims to your land or home. For example, if the prior owner of your home had an outstanding judgment against him or her there may be a lien filed on the property that has to be paid off. A search of the title would identify this lien for you and you could make sure it was paid off before you took over ownership of the land.
Sometimes there can be claims to land or title that are not readily foreseeable. For example, someone may have a claim of adverse possession over your property, which could not be identified through a title search. Under certain circumstances, title insurance may protect you against these types of unforeseen claims or issues such as boundary disputes between neighbors. If a title company states that your title is clean but a conflict later arises, insurance protects you from the financial loss that might arise from a covered claim.
As discussed below, there are alternative ways to resolve title to your property in the event competing claims arise, but they all involve much more money and time. Title insurance requires a basic payment to the title insurance company in exchange for a policy, and a claim can then be made against that policy at a later date.
Alternatives to Title Insurance
Title insurance provides security in advance of any competing real estate claim that may arise. It confirms that title to your property is clear and guarantees protection down the road against any covered issues. Note that it is very important to read the terms of the title insurance policy to determine what issues are covered by the policy. Not all claims relating to the property will be covered by title insurance.
For some individuals, rather than pay for title insurance up front in the process, it makes more sense to take the risk and wait and see if any competing claims are out there. Indeed, almost any individual can have a title search completed initially to make sure that title is clear, and then deal with conflicts that arise down the road.
In the event that someone does bring a competing claim against your property, the alternative to title insurance, or when the claim is not one covered by title insurance, is usually litigation. Essentially, the competing parties will need to bring their claims before the court and ask the court to decide who has legal ownership over the property.
This can be done in a variety of ways. If you are an outside individual making a claim on a piece of property, you may file a lawsuit related to your specific request, such as adverse possession or a type of easement. If you are a property owner who knows other claims are out there, you may seek to preempt them by moving to “quiet title” of your property by having the court declare that you are the owner free and clear.
These approaches do have the advantage of ensuring a final resolution over your property and allowing you to eliminate competing claims, but they also can be very lengthy and expensive. Particularly when proving a claim requires going back quite far in history, it can be difficult and resource intensive to litigate a real estate dispute in court.
Washington Attorneys Helping You Protect Your Property Rights
If you are purchasing property, chances are title insurance has been a part of your closing process. If you have questions or concerns about any title reports that you have received, or how title insurance should work, a real estate attorney can work through these issues with you.
Alternatively, if you are a current property owner who is facing a potential outside real estate claim, like a claim of adverse possession, you should evaluate whether your existing title insurance covers this claim and whether real estate litigation to resolve the issue is necessary. Depending on the nature of the claim it may be possible to resolve the dispute without engaging in lengthy litigation battles.
At Blado Kiger Bolan, P.S., our real estate attorneys frequently work on title issues for personal homes and large commercial real estate properties. We can assist you whether you are at the buying stage, or if you are a long-term owner who is now experiencing an unexpected challenge to your property rights. For more information, contact us online or at (253) 272-2997.