Title Insurance-How Important is It?

Home buyers, particularly those that find themselves strapped for cash, often look for ways in which they can reduce their closings costs. Title insurance, as a big ticket item, is usually one of the first items they try to eliminate. If you’re financing the purchase of your home there is a good chance you won’t be able to eliminate this item from your list of closing costs because it is typically required by most lenders in order to give final approval for the mortgage loan. Cash buyers; however, have the option of whether they want to pay for title insurance and more often than note question whether it is really important to pony up all that money for something they see as being unnecessary.

Depending on the state in which you live, the type of property you’re purchasing and the final purchase price, the title insurance can vary in price. The average price for title insurance in Arizona runs about $2,600. When you’re scrimping pennies to pay the down payment and closing costs, shaving almost $3,000 can really mean a lot to most home buyers. Is it really a good idea to do without the title insurance; however, if that option is available to you just to reduce closing costs?
To answer that question, it is important to understand the real purpose of title insurance. The idea of title insurance is to protect the buyer as well as the lender if there is one from any claim on the land that could arise from former owners. Could that really happen? Yes, it could and more often than you might imagine. Let’s say, for example, that a former owner of the property failed to pay a subcontractor for work that was performed on the property. It might not even be the owner that is selling you the property; it could be the person who sold it to him. At any rate, if that person obtained a mechanic’s lien against the property for the fees that were not paid to him, you could find yourself in a situation in which the subcontractor has a claim on the property you just purchased and there is nothing you can do about it; unless, that is, your purchased title insurance.

When you purchase title insurance it insures a diligent search will be performed to unearth any possible claims that may exist on the property. With this type of coverage you can rest assured that in the event a long lost heir turns up later and tries to place a claim on your property, the title insurance company will be responsible for the costs of any legal action that is necessary to settle the problem as well as funds that may be due the claimant, not you. The coverage will remain in effect as long as you own the property.

 
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