Buying a home is a major investment. While buyers often focus on the purchase price, inspections, financing, and closing costs, there is another important part of the transaction that deserves attention: title insurance.
Title insurance helps protect against certain covered ownership and title problems that existed before the property changed hands. These problems may not become apparent until after closing.
Whether you're purchasing a primary residence, second home, or seasonal property in Southwest Florida, understanding title insurance can help you make more informed decisions.
What Is Title Insurance?
Title refers to your legal ownership rights to a property. Before a real estate transaction closes, a title company or closing professional typically examines public records to determine the property's ownership history and identify potential title issues.
Examples of problems that may affect a property's title include:
Unpaid property taxes
Outstanding mortgages or liens
Judgments against a previous owner
Errors in recorded deeds or public records
Ownership claims involving missing or unknown heirs
Certain undisclosed easements or other claims
Title insurance can provide protection against covered losses and legal expenses resulting from qualifying title defects, subject to the policy's terms and exclusions.
The Two Main Types of Title Insurance
Buyers may encounter two different policies during a real estate closing.
1. Owner's Title Insurance Policy
An owner's policy protects the buyer's ownership interest against covered title problems.
For example, imagine purchasing a home and later discovering that an unpaid lien from a previous owner's contractor was not properly resolved. Depending on the circumstances and policy coverage, owner's title insurance may help protect you against the resulting financial loss.
An owner's policy generally remains in effect for as long as you or your heirs retain the insured ownership interest.
2. Lender's Title Insurance Policy
If you are financing your purchase, your mortgage lender will generally require a lender's title insurance policy.
This policy protects the lender's financial interest in the property. It does not protect your equity or replace an owner's policy.
That distinction is important for buyers to understand.
What Is a Title Commitment?
Before closing, buyers typically receive a document called a title commitment.
This document outlines the conditions that must be satisfied before the title insurance policy can be issued. It also identifies exceptions to coverage.
Pay attention to:
Outstanding mortgages that must be paid and released
Tax obligations
Recorded liens or judgments
Easements and restrictions
Other matters affecting ownership or use of the property
Not every exception is necessarily a problem. For example, many established communities have recorded deed restrictions or utility easements. However, buyers should understand what is listed and ask questions about anything they do not understand.
Who Pays for Title Insurance in Florida?
In Florida, the purchase contract generally addresses which party is responsible for title-related expenses and who will handle the closing.
Local customs can vary, and the contract controls the parties' agreement. The buyer and seller should review these provisions carefully.
Florida also has rules concerning the selection of the closing or title agent. The person paying the title insurance premium generally has the first choice of title agent, subject to lender approval when applicable.
Is Title Insurance a One-Time Expense?
Unlike homeowners insurance, which is typically renewed annually, title insurance generally requires a one-time premium paid when the policy is purchased.
An owner's policy can provide protection for as long as you or your heirs own the insured property, subject to the policy terms.
The actual coverage, exclusions, and premium should be reviewed with the title professional handling your closing.
5 Questions Florida Homebuyers Should Ask
Before closing, consider asking:
Will I receive an owner's title insurance policy?
What does the title commitment show?
Are there outstanding liens, mortgages, or taxes that must be resolved?
What exceptions or exclusions are listed in the proposed policy?
When should I expect to receive the final title insurance policy?
Don't hesitate to ask the closing professional or your attorney to explain any documents or coverage provisions you do not understand.
Protect Your Investment by Understanding the Details
Title insurance may not be the most exciting part of buying a home, but it is an important part of understanding your ownership protection.
A little preparation before closing can help you avoid surprises and move forward with greater confidence.
If you're considering buying or selling property in Fort Myers, Estero, Bonita Springs, Naples, or Marco Island, I'm happy to help you understand the steps involved and connect you with the appropriate professionals when questions arise.
Let's keep your real estate transaction moving in the right direction!
Constance (Connie) Clark, REALTOR®
Florida Realty Group, LLC
PSA | RSPS | RENE | SRS | SRES | ePRO
239-319-9577
Connie@floridarealtygroup.net
https://ConstanceClarkRealtor.com
Real People...Real Service...Real Estate!
Educational information only. Title insurance coverage depends on the specific policy, its terms, conditions, and exclusions. Consult your title insurance professional or real estate attorney for advice about your transaction.