The Homebuyer’s Toolkit: Title Insurance

Buying a home entails much more than I anticipated. Just when I thought I had learned all there was about the costs involved with becoming a homeowner, here comes another expense called title insurance. Before you purchase a home, it may have gone through several ownership changes, title changes, or problems, such as back taxes or forgeries. A title report and title insurance lets you know what you’re getting into before you buy, and it protects you from any monetary or legal issues. H. Richard Adelman, owner of Professional Land Services, L.L.C., a title insurance company, joined us at this past week’s homebuyer seminar sponsored by the Bedford Central Community Development Corp. He explained why title insurance and a title report can save you a lot of headaches in the future.

Black Enterprise: What is title insurance?
Adelman: When a person buys a property or a bank gives a loan to a person that owns a property, the insurance company guarantees that they will not have a problem either financially or legally as a result of what may have happened to the property before they bought it. It ensures that there is no fraud, liens against the property, errors missed during a title search, and [that] the seller is really who they say they are.

B.E.: What is a title report?
Adelman: A title report is a compilation of items that could cause concern to a purchaser or lender about the property and/or about the individual buying or selling the property. It includes a description of the property, names of titleholders, the liens that could affect the title, and all the possible things that have to be cleared up in order for the buyer to purchase the home and get insurance without a problem. For example, it will provide information such as the Certificate of Occupancy, list any back taxes, and investigate if the owner is a terrorist or if they are bankrupt.

B.E.: How much does it cost?
Adelman: In metropolitan residential areas a title report ranges from $250 to $450. (Check with your real estate attorney for your area.) Title insurance is a one-time fee paid at closing that covers the insured party for any claims and legal fees that arise out of any problems that are found. This fee is collected by the title company and pays your state taxes, city taxes, and the title company’s fee. The cost of title insurance varies, but the greater the purchase price of the home, the greater the title insurance.

B.E.: Is it required for home purchase?
Adelman: The bank is going to make you take title insurance to protect their interest. They’re not loaning money unless they know they have an insurance policy to back it up. For example, if there is a judgment against the seller for $1,000 and then the seller sells the property, the bank has the right to go after the seller or the recent buyer because they inherited a property that had a lien notice in the court records. The bank can elect which person to sue because the lien wasn’t settled at the closing.

B.E.: Who is responsible for requesting a title report?
Adelman: Usually the attorney requests the report because they are responsible for viewing it, but a buyer or seller can request a report and find their own title company to work with. If you have a good real estate attorney, let them do their job because they may have a connection with a title company and be able to expedite the process. Whatever you do, make sure you hire a real estate attorney or an attorney who has handled real estate transactions. That’s more important than anything in this whole process. A bad attorney can cost you in the end. You get what you pay for.

Other posts in The Homebuyer’s Toolkit series:

Condo or Co-Op?

Getting Started

Qualifying For A Mortgage

Key Players

Let’s Talk Money

Money Attitudes and Budgeting

Building Financial Security

How Your Credit Score Adds Up

Renting vs. Buying

LaToya M. Smith is a staff writer at Black Enterprise