First-Time Home Buyers: Test Your Title Insurance Knowledge
If you're buying a home or property for the first time, you might not be aware of all of the things that happen "behind the scenes" during the time between you making an offer and you receiving the keys to your new house. One of the expenses that you might not understand is title insurance. Here's a quiz to see how much you know about this subject.
True or False? Title insurance is a scam for the real estate industry and a waste of money.
Answer: Absolutely false. Obtaining a title insurance policy is critical when you buy a house. If you don't have it, you could lose the house and all of your money if title transfer errors are discovered in the future.
True or False? I don't need to pay for title insurance, I can run a title search on my own.
Answer: You could try, and maybe you would be able to dig up all of the information about the property that you are buying. But if there were errors made in the transfer process at any point in the past, you might not be able to find them. Title companies like Gulf Shores Title Company Inc conduct extremely through searches and know how to locate potential discrepancies.
True or False? Even if there was an error in the past, it doesn't affect me. I paid for the property, so I own it now.
Answer: False. You can actually lose your rights to the property, and you may not be able to recover your purchase price if you do not have insurance. It would be similar to a scenario of you unknowingly purchasing a stolen car. When it's discovered that the car was stolen, it will be returned to its original owner, regardless of whether or not you lost money on the transaction. The exact same thing can happen with a house.
True or False? I don't have to pay for title insurance if I don't want to.
Answer: Probably false. If you pay all-cash for a property, then yes, you can choose not to obtain a title insurance policy. But if you take out a mortgage of any size, your lender will probably require you to get title insurance. They will not approve your loan if you don't. This protects their interest in the property.
True or False? If the title company missed something in its search, then I will get to keep the property as long as I had title insurance, no matter what goes wrong.
Answer: False. You may be able to keep the property, or you may have to surrender it to the legitimate owner, if there is one. However, as long as you had obtained a title insurance policy, you will not lose any money. The insurance company will reimburse you for any costs incurred in defending your right to the property, and it will reimburse you for the price of the property if in fact you lose ownership.
There are a lot of costs associated with purchasing a house, and many of them could seem exaggerated and frivolous (administrative fees, etc.) But title insurance is the one expense that you should not hesitate to pay. It may save you a lot of money and heartache.