Is Title Insurance Worth the Investment?

Is Title Insurance Worth the Investment?
Published On: March 9, 2022

Discover How Title Insurance Protects Your Home

Imagine settling into your dream home, spending thousands of dollars on home renovation projects, and making years of mortgage payments only to have someone knock on your front door claiming to be the rightful owner of the property you’ve grown to love?

Sound worrisome? If you have title insurance, you can rest easy knowing your home – and investment – is protected. What is title insurance, though? And how can it help you when an unknown heir knocks on your front door? Let’s take a look at what title insurance is and how this type of insurance protects your home.

What Is Title Insurance?

Before settling a real estate transaction, the title of a property must pass from the buyer to the seller. During this process, a title company will perform a title search to uncover any problems that may prevent the title from being transferred legally. A title company will go through all previous owners and look for title problems like lines, unpaid taxes, building code violations, errors in public records, and other issues.

Once the title is deemed clean and devoid of all issues, the title can then be transferred at closing. Although uncommon, title searches aren’t perfect and sometimes a title dispute may arise weeks, months, or even years after settlement. This is why title insurance is key when buying a home.

Title insurance, which is issued by the company who performs the title search, protects the insured from any issues uncovered after closing, including that unknown heir who knocked on the door. In real estate, there are two types of title insurance – lender’s title insurance and owner’s title insurance.

  • Lender’s Title Insurance: If you are working with a lender, they will require you to purchase lender’s title insurance at closing. This policy ensures the lender has the first lien on the house in the event of foreclosure, unpaid property taxes, an ownership dispute, or other issues. Lender’s title insurance is solely for the benefit of the mortgage lender and does not protect you – the buyer – from title disputes.
  • Owner’s Title Insurance: Owner’s title insurance lasts for as long as you have legal ownership of the property. For a one time fee, this policy solely protects you as the purchasing owner from ownership claims after settlement.

The cost for title insurance is based on the purchase price of the home and the rates are set by the Title Insurance Rating Bureau of Pennsylvania. Rates vary, but to get an idea of what your investment would look like in Pennsylvania, a title insurance policy for a home priced at $175,000 would be $1,458 and for a home priced at $250,000, $1,885.

Risks of Not Having Owner's Title Insurance

When buying a home, the costs sure do add up. Between the purchase price, closing costs, homeowners’ insurance, inspections, and other fees, you may be tempted to skip the optional owner’s title insurance investment. Having title insurance, though, can save you thousands, even hundreds of thousands of dollars, down the road.

If you choose to not purchase owner’s title insurance, you will be on the hook financially should an issue arise with the title. For example, in the case where an unknown heir knocked on your door, you would be responsible for any lawyer’s fees and other costs to prove you are the rightful owner. And should that lawsuit find the unknown heir DOES have the right to the property, you will lose any equity in the house and have to find a new place to live.

Other possible scenarios where owner’s title insurance is worth the investment include:

  • Unpaid taxes: Did the previous owners pay their mortgage on time, however left you with a huge unpaid tax bill? Owner’s title insurance will cover the debt. Owner’s title insurance will also address unpaid HOA fees, liens, and other claims against your home’s value.
  • Unknown easement: Let’s say you are ready to install an inground pool on your new property, but the county zoning official denies your request stating there is an easement right where you want to put in the pool. This easement wasn’t discovered during the title search and if it was known beforehand, it would have affected the sale price. Your owner’s title insurance policy would allow you to recover the difference in price between what you THOUGHT the value of the home was at the time of purchase versus what it is ACTUALLY worth considering the easement. While it’s certainly disappointing about the pool, you could potentially recover thousands of dollars in your home’s value.
  • Fraudulent Sale: Your purchase of your new home went smoothly, and you are living in the home for a year or two before someone shows up at the home asking why you are living in his house. As it turns out, the man’s son was taking care of the house while he was overseas, but his son forged his name and signature to sell the house to you. The forgery went through because the son is a “Junior” and the name on his ID matched the legal documents. A title insurance policy will help compensate the father for the value of the home.

Bottom line – owner’s title insurance may feel like an additional financial burden at your closing, but it can save you from headaches and financial risks. Owner’s title insurance gives you peace of mind knowing your home – and your investment – are protected for as long as you own the house.

Your Local Title Company in York, Pa.

Watermark Land Transfer is a full-service title insurance company offering customers top-notch concierge level service. Our team of local closing and settlement agents is ready to help you with your real estate transaction. We do a thorough 60-year title search for our clients before issuing both lender’s and owner’s title insurance.

If you are in the process of buying a home, you have a choice on who to use for your title search and title insurance. Contact us today with any questions you have, or to chat about your upcoming home purchase!

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The Benefits Of Choosing Watermark

Watermark Land Transfer is a real estate title company in York, PA offering title services, title insurance, closing and settlement services, and notary services. Our goal is simple - to provide our clients and our community with the resources they need for a hassle-free closing. We are more than a title company and work hard to show our clients that we are truly consumer-focused.

Our team of title agents makes it easy for homeowners to buy or sell a home in Central Pennsylvania and Northern Maryland. We offer both on-site and virtual title and settlement services and treat our clients like family. If you are in the process of selling or buying a home, reach out to us today to see how working with Watermark Land Transfer can help.

1st Watermark Benefits

We Are Vested in You

When you work with Watermark Land Transfer for your real estate transaction, we are truly vested in your success. We treat each contract, document, and closing as if it were our own.

2nd Watermark Benefits

We Keep You In the Loop

During the closing process, we will keep you informed every step of the way so there are no surprises on settlement day.

3rd Watermark Benefits

We Live Here, Too

Watermark Land Transfer is an independent, locally owned title company. We have the flexibility to get things done for you without the constraints of a national title company.