Last week, another real estate title fraud attempt was thwarted by my colleagues at COMPASS RE. As has happened all-too-often these days, someone was trying to sell a property quickly while impersonating the real owner. While this attempt, and many others, was prevented, what happens if the house you own was sold by one of these scammers before you moved in?
That’s where real estate title insurance comes in. This one-time expense, paid at closing, protects owners from issues like this example, and many more. But just what is real estate title insurance? Can I shop for it like other insurances, and what coverage levels are available? We’ll uncover all this, and more, in this week’s article. Join me for a journey into the world of real estate title insurance!
What is real estate title insurance?
Real estate title insurance is another form of protection in our modern world. Just as we insure our vehicles and homes against issues, we can insure our real estate titles against issues. Interestingly, this is a one-time cost that protects you against issues that have already happened. That’s right, this insurance protects you from the past. In a world where real estate title fraud is an ever-present concern, this protection can add an invaluable layer of security.
Do I need real estate title insurance?
While there is no law mandating real estate title insurance, as there is for automobile insurance, it’s fair to consider this insurance practically required for a property transaction. Even if the buyer opts against such insurance, any involved mortgage lender will likely require it to approve and fund the loan.
Through all my years of experience in real estate, I recommend every home buyer gets real estate title insurance. For a one-time fee, any headaches that crop up for the real estate title are covered. Should a lost heir appear after 30 years of being trapped in a magical board game and claim your land, this insurance would have you covered.
What types of real estate title insurance can I get?
There are two distinct types of such insurance for consumers: standard and enhanced. Both packages, along with their fees and costs, are mandated by the state. For us, the governing agency is the Pennsylvania Insurance Department. For additional information, you’ll have to talk with a licensed real estate title insurance broker. Standard packages cover most situations that could affect most consumers. The enhanced package covers everything that the standard package covers, along with most conceivable situations.
Standard Package Covers:
- Complications relating to the accuracy and validity of the real estate title anywhere back in the chain of custody.
- Complications due to bankruptcy back in the chain of custody.
- General access rights.
Enhanced Package Covers:
- Everything the Standard Package covers.
- Complications due to easements and encroachments.
- Complications due to private use restrictions.
- Complications relating to the accuracy and validity of the title after you take ownership.
- Right of actual vehicular and pedestrian access to and from the land.
- Complications due to building permit violations.
- Complications due to subdivision laws
- Complications due to zoning laws.
Standard and enhanced real estate title insurance covers a wide variety of situations, well beyond the scope of an article like this. If you’d like to learn more about this topic, please give me a call or reach out to your insurance broker. Though I’m not a title insurance broker, I know many and can point you towards several I recommend. The big things to remember are that real estate title insurance is a 1-time expense, the standard package protects you from most complications based on issues that happened before you took ownership, and the enhanced package protects you from almost any situation that could arise, past or future, with your property title.
Thank you for joining me on another investigation into an often-overlooked element of real estate! I hope you learned something along the way and look forward to hearing your thoughts and questions around title insurance. If you know anyone else who may be interested in this information, please share it with them!
