Title insurance is an invaluable safety net in real estate transactions. This type of insurance protects buyers and lenders from potential claims or disputes over the ownership of a property.
Before closing on a property, buyers want to ensure they are receiving clear ownership without hidden issues that could arise later. Title insurance helps guarantee that.
The purpose of title insurance
During real estate transactions, the title company conducts a thorough search of the property’s history. This search reviews public records to identify any potential issues such as liens, unpaid taxes or disputes over property boundaries. While the search aims to uncover these problems, some issues may not surface right away. This is where title insurance comes in. If a problem comes to light after the purchase, title insurance can protect the buyer from financial losses.
How title insurance benefits buyers
For buyers, title insurance is a one-time premium paid at closing. This provides ongoing protection against claims made against the property, such as an undiscovered heir claiming ownership or fraud in previous transactions. Without this insurance, a buyer could lose their property or face expensive legal battles to defend their ownership rights.
The role of title insurance for lenders
Lenders in New York require title insurance as well. The lender’s policy ensures that the loan remains secure by protecting the lender’s interest in the property. The buyer usually pays for both their own policy and the lender’s policy. Both policies offer peace of mind that the title is clear and serves to address any hidden claims.
Overcoming complex real estate situations
New York real estate laws make title insurance a practical necessity, as the state has a complex property ownership history. Many properties, especially in New York City and surrounding areas, may have decades of ownership records. Gaps in these records or unclear transfers can cause ownership disputes. Title insurance helps prevent buyers from dealing with these issues themselves.
Without title insurance, both buyers and lenders could face significant financial risk. Having the right coverage will grant peace of mind during real estate transactions where huge investments are on the line.