04/08/2021 Title Insurance: Antiquated or Necessary?

If you haven’t purchased a home before, it’s likely you haven’t heard of title insurance, so it might come as a surprise that it’s a big industry, with a $16.6 billion market size. If you’re in the process of buying a home, whether or not to purchase title insurance is an important decision. Ultimately, you will need to make a choice about whether it’s worth it to you. But unfortunately, there are no easy choices when you’re buying a house

Below, I’ll describe what title insurance is, whether you need it, and how an attorney can help. If you are unsure about a potential title issue, it’s always prudent to reach out to a qualified New Jersey real estate lawyer to learn about your rights. Bavagnoli & Bavagnoli has been helping clients with real estate issues for nearly three decades and we may be able to help you as well. 

What is title insurance? 

Let’s say the wild and stressful ride of purchasing your new home is over. After endless paperwork and coordination with your realtor, lender, and everyone else, you’ve been handed the keys to your home. But a few weeks later, the great grandnephew of a previous owner shows up, claiming that he inherited your house and that your home sweet home is his.

It may sound far-fetched, but these are the kinds of disputes that title insurance is designed to protect you against. If you have title insurance, you’re covered. If you don’t, you could face some complex legal problems that potentially lead you to lose your home, not to mention the significant money that you’ve put into the buying process. This is all to say title insurance protects you from unforeseen issues or legal claims against your ownership of the property. 

Okay, but do I really need title insurance? 

Before a lender will approve a mortgage, a title search is always done. This confirms the legal owner of the property and their right to sell it to you. After all, if the seller isn’t the legal owner and can’t sell the property, the mortgage company will be financially on the hook in the early days of your mortgage. During a title search, a real estate attorney or other party does a thorough search of public records to confirm ownership of the property and flag issues that need to be resolved. 

For this reason, some say that title insurance is unnecessary because it is an antiquated relic of a bygone era. We have much more robust property records today than a century ago, so title disputes are less common today. In most cases, you should be just fine if your real estate attorney did a thorough title search. However, issues ranging from fraud to simple record-keeping mistakes can come up years down the road, well after you close on a house. 

Common Title Issues

Without title insurance, a variety of scenarios can arise requiring you to work with a NJ real estate attorney. Some of the most common issues include:

• Previous ownership claims, where a homeowner passes away and the home is left to a beneficiary named in their will.
• Liens, where the past owner was in debt and a lien was placed on the property. Liens must be settled before the property is purchased or the buyer may be held responsible.
• Boundary disputes, where you buy a house and disagree with your neighbor about the boundaries in the deed.
• Filing errors, which occur when a title changes hands. Again, these must be resolved before a property is purchased to prevent legal issues.
• Easements, which put restrictions on how you can use your property.
• Encumbrances, where a third party claims your property is theirs, usually because of a past lien, mortgage, or legal agreement.

Without title insurance, you could face stressful legal dilemmas that require significant legal knowledge to resolve. Working with an experienced real estate lawyer can be especially useful to resolve these issues in a timely manner. You can also hire them to perform a title search to flag any errors in time to repair them

How can a lawyer help?

Regardless of whether or not you have purchased title insurance, if title-related legal complications arise at any point during or after your home purchase, a real estate attorney in Passaic County can tell you more about your rights and whether or not you have a case. 

Contact Bavagnoli & Bavagnoli today for a free consultation at (973) 785-9522.