What is Title Insurance?
/Here in the Salt Lake area we use Title Companies to complete our real estate transactions. There are some states that are similar and some that use attorneys. The job of a title company is to compile all the documentation on the file and prepare them for execution. They also receive and disburse all the monies on the transaction. They are neutral, impartial third parties.
Beyond preparing the paperwork and handling the money they also provide title insurance policies. Title Insurance protects the title of the property from any defects or clouds - claims of ownership or money owed to people other than the new owner.
The Owner's Title Insurance Policy
The Real Estate Purchase Contract that is typically used by Salt Lake City real estate agents states "At Settlement, Seller agrees to pay for and cause to be issued in favor of Buyer...the most current version of the ALTA Homeowner's Policy of Title Insurance. " This policy is a comprehensive examination of recorded documents to determine defects in the title. It covers up to the full sales price of the home. It insures against all recorded defects that are not excluded by the policy and is good from the date the policy is issued back in time to when the land was very first deeded.
The cost of this policy is regulated by the state and based upon the purchase price of the home. I've found in my experience that it's typically less than 1% of the purchase price of the home.
The Lender's Title Insurance Policy
If the buyer of the home is using a loan to purchase the property there will also be a Lender's Title Insurance Policy on the transaction. It's very similar to the Owner's Policy but it covers the lender, not the new owner. Another difference is that it only covers the amount of the loan, not the full purchase price. It's also assignable to other lenders if the loan is sold. It is typically cheaper than the Owner's Policy.
How Do You Choose A Title Company?
Most real estate agents have a title company where they complete most of their transactions. As an agent myself, the benefit of using the same title company becomes trust and familiarity. Transactions feel much simpler and streamlined when the people on both ends are known to each other. That being said, you, as a buyer or seller of a home, can choose any title company you'd like. They sometimes charge differently for their services so you can always shop around. I know the title companies I often use are very similar in cost and they both do a great job. When I've compared them to others myself they have been the best value.
And that's my brief and simplified explanation of title insurance. If you have any other questions about title insurance or real estate or need to buy or sell a home, give me a call. I'd love to help.
