When you buy a piece of residential real estate, you don’t just pay the asking price: You also have to cover a lot of different closing costs. Some of these, like broker fees, may not be negotiable. Others of them may be expenses that you can avoid.
Some people will go without a survey or an inspection to save money. Often, mortgage lenders will not let buyers sidestep those expenses. Those looking closely at the financial details prior to closing may realize that they have to pay for title insurance not only for themselves but also their mortgage lender.
Although you can’t refuse to buy a lender’s policy, you can refuse a buyer’s policy. What’s at risk if you make that decision?
Title insurance protects your ownership rights
To obtain a title insurance policy, you will have to have a company perform an exhaustive title search looking at the ownership history of the property and any liens that require payment as part of the transaction. Your title insurance policy will protect you if someone else eventually shows up claiming to be an owner or to have the right to some other hold on the property’s title.
Title insurance will first pay for an attorney to represent you in a title dispute in court. If the title claimant is successful and you lose possession of the property, title insurance will reimburse you for the investments you’ve made in the property.
If you don’t have a title policy and someone brings a claim against your home, you could lose out on the down payment you made, all of the accrued equity from payments since your closing and the value of improvements you’ve made to the property. Learning more about the details of a residential real estate transaction can help you make informed choices prior to your closing.