Today, we’re going to talk about an important issue called title insurance. A lot of people know about homeowner’s insurance but not necessarily “title insurance.”
If a house catches fire and there is physical damage to the building, the owner is covered because of the homeowner’s insurance. Similarly, if there is an unpaid debt against the Seller, the asset that the Seller owns is subject to debt collection, so the title of the house is in defect. However, the loss to the purchaser is covered by the title insurance policy.
Another example is if the property is from an estate sale, there might be someone who is entitled to inherit a partial percentage of the estate. If the property is sold without having that person’s consent, then that person is entitled to go against the Purchaser. The debt or defect will tag along with the house, until it is paid off. If the Purchaser has title insurance, then the loss to the Purchaser is usually covered under the policy.
Some people will ask: “If I buy from the sponsor or developer, don’t they have to have everything cleared before they can actually sell a condo or a brand-new house to me?” The answer is yes, however, the homeowner is still strongly advised to purchase title insurance. Why?
- If there is a lender, the lender will require the buyer to purchase title insurance. This way, their equity in the house will be protected.
- In the future, if the homebuyer wants to sell the property and does not have title insurance, they must locate the developer or principal of the developer to execute any legal document. With the passage of time, say 10 years, is the individual buyer going to be able do that? If the homebuyer has title insurance, by presenting the title insurance policy to his purchaser’s title company, the owner does not need to do anything else. The title issue is usually covered by the title insurance policy.
Sometimes, there is no lender. The buyer pays all cash and will often ask:
“Do I still have to buy title insurance? Since I paid in cash, there’s no requirement from the lender asking me to do that.”
The problem is the buyer’s future buyer might need financing and definitely there will be a lender to review the entire history of the title and any outstanding title defect. Without a title insurance policy, the lender might not issue a loan to the future buyer, which means the owner cannot sell the property.
The premium for title insurance is a one time fee. In New York State, the rate to calculate the premium for title insurance is the same regardless of which title company one uses to purchase the insurance.
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Jacqueline Huang Huang & Associates, P.C. 6402 8th Avenue, Suite 405 Brooklyn, NY 11220 Telephone: (718) 435-666 Email: jackiehuang@huanglawfirm.com  |
