What Is Title Insurance?

Title insurance is an insurance policy protecting owners and lenders from loss resulting from defects in the title of real property.  In Texas, the normal way to do real estate business is a closing at a title company that issues a title insurance policy to both buyer and lender.  Must you buy title insurance to close on real property?  No, but it’s a really good idea to do so.  Here are three good reasons why.

1)  The title company maintains a database of real estate documents that can be searched in order to produce a “Title Commitment”, which an important part of the pre-closing process.  It’s important the buyer and your Realtor read the commitment especially the Schedule “C”.  If there exceptions you don’t understand or can’t live with you should contact the title company for explanations or ask for corrections.

2)  The title company acts as a clearing house for closing documents that need to be signed and recorded, as well for funds that need to be disbursed or collected.  The “Closer” at the title company is the person who assembles the file and prepares the HUD1 or settlement statement and facilitates the the closing on closing day.

3)  The title policy provide an avenue of recourse and recovery in the event either the lender or the buyer suffers a monetary loss as a result of defects in the title.  An example would be if the title company missed a valid lien and the lienholder comes to collect or an unknown heir appears and claims interest in the property.  The title company will work to resolve these types of issues and if appropriate pay the lender and or buyer compensation.

Happy Trails,

Donnie