Buying a home is one of the most exciting and significant investments you’ll ever make. As a realtor with over 21 years of experience working alongside my husband, James, I’ve seen firsthand how important it is to protect that investment. One of the key ways to do that is through title insurance. But what exactly is title insurance, and why is it so important? Let’s break it down in an easy-to-read guide.
What Is Title Insurance?
Unlike other types of insurance that protect against future events (like car accidents or home fires), title insurance protects you from issues that may have happened in the past but could affect your ownership of the property. These issues might include unpaid taxes, undisclosed heirs, or errors in public records.
Title insurance is a one-time fee paid at closing, and it provides peace of mind for as long as you or your heirs own the property.
How Does Title Insurance Protect You?
Title insurance protects you in two main ways:
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Preventative Efforts: Before issuing a policy, the title company conducts extensive research to identify and resolve potential issues with the property’s title. This includes:
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Reviewing past ownership transfers.
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Verifying that all parties with ownership rights participated in past and current closings.
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Identifying and settling debts, liens, or claims against the property.
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Insurance Coverage: If a problem with the title arises after closing (e.g., a previously unknown heir claims ownership), the title insurance company will cover the legal costs and losses up to the policy amount.
Is Title Insurance Optional?
While the loan policy (which protects the lender) is almost always required, the owner’s policy (which protects you) is technically optional. However, opting out of an owner’s policy is risky and rarely saves you much money. Think of it as an extra layer of security for your investment.
When Will You Receive Your Title Insurance Policy?
If you purchase an owner’s title insurance policy, you can expect to receive it by mail within about 4 weeks after closing. Be sure to keep this policy, along with your original deed and closing documents, in a safe place. Having these documents on hand can make future transactions smoother and may even earn you a discount on title insurance.
Standard vs. Enhanced Title Insurance
Most buyers receive standard title insurance, but you can also opt for enhanced title insurance if your transaction qualifies. Enhanced policies offer additional coverage for certain risks, though many of these risks can be avoided through proper due diligence, such as obtaining a property survey.
What About Construction and Permits?
Title insurance focuses on land records, not construction records. If you’re aware of past construction or planning future improvements, it’s important to ensure compliance with local zoning and building codes. Title insurance does not cover issues related to unpermitted construction or land use regulations.
Do You Need a Survey?
Surveys are not typically required for residential closings, but they can be helpful. A survey locates property boundaries and identifies areas where construction may be restricted (e.g., due to easements). While standard title insurance doesn’t cover survey-related issues, reviewing a survey before closing can help avoid surprises.
Who Pays for Title Insurance?
A common question we hear from both buyers and sellers is, “Who pays for title insurance?” The answer can vary depending on the type of property and local customs. Here’s what you need to know:
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Resale Properties in Davidson County: In the past, it was customary for sellers to cover the cost of the owner’s title insurance policy. However, this is negotiable, and sellers are not obligated to pay. In today’s market, don’t be surprised if sellers push back and expect the buyer to cover this cost as part of their closing expenses.
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New Construction or Bank-Owned Foreclosures: In these cases, buyers typically pay for the owner’s title insurance policy.
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Competitive Situations: If you’re in a bidding war or a highly competitive market, consider offering to cover the cost of title insurance as an incentive to make your offer stand out. It’s a small investment that could make a big difference in securing your dream home.
A Tip from The Crawford Team
When it comes to title insurance, we highly recommend working with a trusted local title company. Our go-to is Rudy Title—they’re knowledgeable, efficient, and make the process seamless. Plus, they have a handy title insurance calculator on their website to help you estimate costs.
Final Thoughts
Whether you’re buying or selling, understanding title insurance and who pays for it can save you time, money, and stress. As always, James and I are here to guide you through every step of the process. If you’re navigating the Nashville real estate market, don’t hesitate to reach out to The Crawford Team. We’re here to make your experience as smooth as possible!
