How Title Insurance Protects Real Estate Investors

By on February 21, 2017

Real Estate Investors needs to be extra careful about legal issues that may rise against their property. There are investors who invest in more than one property, and every once in a while a transaction or the very ownership of a house can be disputed bring about chaos.

Disputes concerning real estate can often stretch out over years. The main reason being that high value assets are involved.

Thus inducing stakeholders to spend good money on a legal tangle. The result is court cases, penalties, unnecessary harassment, tension, and wastage of time.

To avoid these issues, often property owners take the aid of insurances to protect their interests in several ways.

Title insurance is one such item, which purpose is to protect the interest of the real estate owners.

What is a Title Insurance

Title insurance is one form of indemnity coverage in short, which protect against any legal issues rising from title and deeds.

To elaborate, it’s a perfect plan and backup for real estate investors, so that they may get protected from any legal issues arising due to defects in the title of the property.

Issues needing a Title Insurance

There may be several issues which may rise from defects in title, or case history of the title of the land or house.

  • There may be defects in the spelling of the owner name, or other important spellings in the deed
  • There may be a history of non-payment of taxes by previous owners of the house
  • Clauses in the deed that may allow construction of a road or line for other uses
  • Notary errors
  • There may be an old case or penalty running for the property that may affect the current owner

All these errors or defects may make the title problematic for the owner, and thus the purposing of insuring a title look attractive as a basic protection.

The thing is very few people are aware of such a product until they get in knee-deep into closing.

Only then will they realize that they could have gotten into a territory where they are not familiar with. Buying a home from someone who might not be the rightful owner even though records show that they are, can seem ridiculous.

Well the good thing is that these things have happened throughout history and there are systems in place and protection available for parties who wish to avail to them.

Significance of Title Insurance

When a real estate investor owns a property, then what he actually owns is not the house or the land, but the Title of the property which means the right to ownership of the property, which plays the main role in case of all future legal proceedings related to the property.

When a problem concerning the title actually arises, then the insurance company reimburses all the expenses incurred by the real estate owner.

In case of a problem, the insurer helps to fight back by paying all penalties occurring due to faulty tax payments or old unsolved cases.

Errors occurring in spite of diligence checks

All real estate investors do their part of due diligence before making any purchase. They source for a good location, work out renovation budgets, draw up a profile for potential clients and tenants, check the apartment for physical defects, view zoning codes to judge the potential of a particular building, etc.

Yet there are errors o title that may occur during a transaction that nobody had ever anticipated. Some of the most common types are:

  • A sudden unknown heir of the owner may emerge and create an ownership problem
  • There may be a forgery in signature in the deed creating troubles
  • Transactions carried out may be under an expired or false power of attorney making the title invalid
  • There may also be some error or mistake in public and government records

It might seem pretty far fetched for such issues to arise that you have to handle yourself.

But that is the concept of insurance.

You won’t know how valuable they really are until the time comes for you to make a claim as a result of unforeseen circumstances.

As an investor who means business, it is only right that you give your dealings some sort of protection just like the concept of starting a company with limited liabilities. The last thing you want is to get into a legal dispute that you are not ready for from the beginning.

All of such problems may rip off the investor instantly and create numerous troubles. The financial loss can be bad enough.

Coupled with the stress of legal battles and the loss of precious time, anyone would want to avoid these side tracks as much as possible. Playing their cards right will save investors of all troubles by paying for all penalties, court case expenses and value of the property in case of a totally forged deal.



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