If you’re buying your first home, you might not be aware of all the closing costs associated with a settlement. One of the largest fees is owner’s title insurance, which is a policy you need to protect your equity investment in the home. Plenty of people enter the real estate process without a clear understanding of the importance of title insurance. Here’s a rundown of the basics and how to make sure you’re covered.
What is title insurance?
Title insurance is a policy guaranteeing that your new home in Decatur, Sandy Springs, Atlanta or wherever you’re buying is cleared of any ownership dispute as of the settlement date. Before completing a home purchase and supplying a down payment, buyers will want assurance that they are in full possession of the property and that no other individual has a claim to the title.
To provide this guarantee, a local title company will run a search to uncover all prior claims against the property that could cause a dispute in ownership. The title search company will then work to clear up any issues that may pop up.
How are title issues cleared?
Some examples of title issues include contested wills involving prior owners of a home, township liens related to unpaid utility bills, or outstanding property taxes. Local easements or survey issues may also affect title. Prior to a settlement, any outstanding liens or taxes owed against the property must be paid and any legal disputes must be settled.
After settlement, the owner’s title insurance policy protects homeowners against issues that were not identified during the title search. If the issues fall under the stipulations of the title insurance policy, the title company will be responsible for settling the claims.
Keep in mind that not every issue affecting a real estate settlement is a title issue. Items excluded from a title insurance policy include liens or claims originating with the policyholder, or certain governmental actions such as eminent domain rights. A full list of exclusions is printed on the title insurance policy for your review.
How do I purchase title insurance?
You buy owner’s title insurance through a title company in conjunction with the title search. Title companies also manage the settlement process for homebuyers. To find a title company, ask your real estate agent for recommendation or search for American Land Title Association members in the Atlanta area. According to Bankrate.com, the most recent cost of a title search and insurance policy in Georgia averaged $1,465. Unlike homeowner’s insurance, title is a one-time fee you pay at closing — but you still need to be aware of this line item when you show up to buy a house.
Buying a home is one of the single largest purchases you will make. Title insurance is just one way to protect your investment and ensure that you are the undisputed owner of your new home.
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