It is highly likely that you have never heard of Title Insurance, so I want to post this blog about the benefits and the reasoning behind this costly item that is purchased at the transaction of a home sale in Franklin and surrounding cities. You have all heard of car insurance and experienced buying it for your car as it is required to have auto insurance so you know that you are buying protection for a future claim (loss or harm). Basically you insure your car so that if you wreck it then you can file a claim to have it repaired. Title Insurance is similar in that it protects you against a loss (claim) against the ownership and function and enjoyment of your property, but this loss is from a claim that arose prior to the purchase of the policy. Another difference with Auto and Title insurance is that your auto policy is a usually an annual policy and so depending upon your driving record and your car you pay it monthly or annually, but Title Insurance is a single principal so you only pay it once when you procure the property.
There are two types of Title Insurance and they are:
- Owners Title Insurance Policy – protects the owners equity in the property. This coverage protects the owner forever into the future against a claim.
- Lender Title Insurance Policy – protects the lender for up to the mortgaged amount (loan amount) and it is bought and paid for by the buyer or seller in the real estate transaction. This coverage lasts until the mortgage is paid off and released.
The lender will most likely mandate that they have title insurance on the mortgage amount and for around $35 plus the increase in insurance cost to cover the owner equity position, both policies can be issued simultaneously. Thus there is not really a reason to take on the large risk for such a minor fee at the time of the purchase.
Who should pay for Title Insurance at a real estate transaction? Well in most states and in most cases, the offer to purchase states that the seller has obligation to deliver to the buyer a “good and marketable title”, and since they can really only answer for the property during their ownership they should have the obligation to purchase Title insurance for the buyer. With that said, it is a completely negotiable item on the contract that we utilize as REALTORS in TN and can thus be negotiated along with price and other closing costs.
Title Insurance still has limits and you should understand if the policy is being issued with exclusions or if you would like extended coverage or coverage that grows as the equity (home value) grows with appreciation. Talk with your agent or title insurance agent about an enhanced policy or an Eagle Policy as First American Title calls it.
I hope that this blog post has provided you an insight into the reason and benefits of having Title Insurance. Becasue of the importance with this large risk, you should always file your Title Insurance Policy in a place of safe keeping and it should never be destroyed. As we stated earlier, you are covered indefinitely into the future for claims that would have arose before the Title Policy was purchased. If you have questions please contact a member of The Grumbles Team and we can walk you through this or connect you to a trusty Title Insurance Agent.
The Grumbles Team is our family serving your family with your real estate needs in Franklin, Tennessee 615-587-5843.
EXIT Realty of the South | 1227 Lakeview Dr. Suite 1 | Franklin | TN | 37067 | 615.550.5555
Williamson County Real Estate Agent
Each EXIT Office Independently Owned and Operated