By Charity Malmberg
As a trusted real estate professional, part of your job is providing the whole scope of purchasing a home – including titles and title insurance. But it’s not always the easiest task, especially if you’re new to the real estate world and may not be sure exactly how to explain the benefits or reasons behind it.
Instead of stumbling through this conversation on your own, here’s a list of five questions and answers via the American Land Title Association (ALTA) about titles and title insurance. Come prepared and ready with answers even before your buyers start asking.
No. 1 What is title?
First off, many people may not even know what a title is, outside of novels and movies. It’s your job to explain to them that their home title is their ownership right to their property. Upon the purchase of their new home, title is transferred from the seller to the buyer, making the ownership official.
No. 2 What is a title search?
Now on to the title search. Explaining to your buyers that this process is an early part of the home buying journey in order to uncover issues that could prevent their rights to the property, is a good way to get them familiar with the importance of title insurance even before it comes up. Explain that title professionals will review public records to see if there are any problems or defects that could cause legal issues down the road, and then clear them up when possible.
No. 3 What is title insurance for?
Buyers title insurance: Many times, a future buyer may wonder why title insurance would even be necessary. They have their title and they’ve done the title search, so what could go wrong? You can explain to your buyer that some properties have a long and complex history of previous ownership. Unfortunately, anywhere in that history, there could be an in issue that arises much later and somehow interferes with their ownership.
Title insurance protects them, engaging the title insurance company in legal cases regarding a disputed title in order to offer assurance that the current owner is protected from financial loss.
Lenders title insurance: Additionally, title insurance protects the lender, and, depending on location, the lender usually requires the buyer to purchase it.
No. 4 What does title insurance really protect me from?
It still might be hard for your buyer to really imagine a scenario in which they’d need to protect the title of their home. Help them understand that title insurance can protect them from any of the following situations:
• Forgery: For example, the seller misrepresents the identity of the person who signed the title, forging another name in place of yours.
• Fraud: It’s crazy to think about, but identity theft can even affect home ownership. For example, a thief steals and uses someone’s identity to sell their home without their knowledge or consent. Or the thief simply takes out a second mortgage on the property and walks off with the money.
• Clerical error: Inconsistent paperwork or historical records are another way for problems to enter in. For example, a small discrepancy in property line may lead to confusion in tracking the title history down the road.
• Undiscovered tax liens: In most cases, your buyer probably won’t know the seller of the home on a personal level. Sadly, without title insurance, if unpaid taxes are discovered, they would be responsible for covering them.
• Undisclosed easements: Let’s say the old owner of their home allowed hunters right-to-pass through their property. Now the buyers want that to change. Title insurance helps protect their ownership rights to the property.
No. 5 Why get title insurance?
Hopefully by now, your buyer already has the answer to this question. But if not, you can revisit the facts: title insurance helps reduce their risk in a number of areas (question 4); more than 80 percent of homebuyers choose to get title insurance each year; title insurance helps protect one of their largest investments, their home.
Answering these five questions for your buyer will help them not only understand the importance of title insurance, but also give them a conviction behind their purchase and peace of mind as they enter their new home.
Insights and some language via ALTA: “Why Ever Homebuyer Needs Title Insurance”
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