What is title insurance and why do you need it?

Title insurance operates to protect the property owner against any future threats, once the specific property is sold.

Title insurance operates to protect the owner of a specific piece of property against any future claims, liens, clouds or encumbrances on the title, to that property once it's purchased. Claims might arise in a variety of ways like fraud, forgery, judgments or unpaid real estate taxes that hadn’t been discovered pursuant to searching the property’s title history before its sale.

When a contract is entered into for the purchase and sale of real estate, the buyer or their attorney is prudent to insist on the issuance of a policy of title insurance at the time of closing. That policy assures that clear title is being conveyed.

Title to the property to be purchased will be searched by a title company prior to closing on it. Documents like historical public records, deeds of sale, court judgment records, mortgages, tax liens, violations, and anything else that might affect title to the real estate will be searched for and reviewed. If an issue to clear title arises (usually referred to as an “exception to the policy”), it must be cleared before closing for purposes of the seller conveying marketable or at least insurable title to the buyer.

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Is title insurance required by law?

Technically no. The general custom in New York is that the title search on the property is the buyer’s responsibility, but any such duty can be waived or negotiated if no lender is involved. In almost all cases, I will insist on a buyer obtaining title insurance. If you intend on mortgaging your purchase, your lender will require its interest in the property be insured with title insurance for the amount of your loan at your cost.

Call an attorney?

Real estate transactions involve complicated procedures and title insurance issues. For advice on these or other matters contact me and I will guide you through the purchase and sale process.