Buying a home is a very intense transaction. Regardless of whether you make a cash purchase or finance the property, you will likely have to wait weeks between when you make the offer and when you close.
There will be multiple professionals involved in the transaction from your real estate representative and mortgage officer to the appraiser and surveyor checking the property prior to purchase. There are entire industries that primarily offer services to those closing on real estate transactions. Their services can add thousands of dollars to the total cost to buy your home.
Some of these charges are unavoidable, but some of them you have the choice of refusing. Buyer’s title insurance is a cost that you can theoretically refuse when buying a house. Is foregoing title insurance a good way to save money?
What happens if you don’t have title insurance?
If you have a mortgage, there will be two title policies on your settlement statement. One protects your lender for the money that they disperse from your mortgage if there is a title claim against the property in the future. The other is the buyer’s policy that protects you as the new homeowner.
You will not have a choice about paying for the lender’s policy. They typically require this as part of financing your purchase. The only coverage you can foergo is the protection for you as the buyer. You also have the option of declining a title policy when you make a cash purchase.
Refusing a buyer’s policy means you essentially gamble your down payment and all of the principal payments you make on the property. Divorces and complicated probate issues can lead to someone bringing a claim against your house later. If the courts uphold their claim, they get to take the property back. Without a buyer’s policy, you lose all the money you invested in your home if that happens.
Title insurance protects homeowners in two ways
A buyer’s policy will give you two kinds of protection if someone claims to have a right to the title to your property after you close on it. The first form of protection is coverage for attorney costs. Title insurance will help you afford legal representation. The second is compensation in case you lose your legal case. That way, the amount you invested in your home can at least become a nest egg for the purchase of a new property.
Understanding the title history of any property before you buy it and carefully reviewing the closing statement are both important to protecting yourself when you purchase a new home.