North Carolina Real Estate Broker Eric Andrews explains what title insurance is, how it works, how lawyers provide it and why a local attorney may be best suited for it.
Speaker 1: What is title insurance and what does it cover?
Speaker 2: Title coverage is coverage for your title, which means ownership. And there are two types of title coverage, there’s lender coverage, and there’s owner coverage. And you need to have a discussion with your attorney which coverage you have. So if you get a loan, you’re going to have lender coverage, you’re going to have coverage for the amount that you own. The amount that the loan is for. If you have owner coverage, it’s coverage for the entire thing. So you could, for the sake of argument, have a $300,000 property. You have a loan for 200,000, you have a 100,000 equity. Well lender’s coverage is about that $200,000 on the loan, it’s not covering your a 100,000 dollars. So make sure you have a discussion with your attorney, make sure that you have both lenders’ coverage and owner’s coverage. When an attorney does a title search for you, they’re looking for defects or encumbrances on the property.
Are there, are there any liens, are there any holes in the chain of title where someone else might make a claim of ownership for your property? So you could have an inheritance situation, a death in the family. There’s a long lost son that nobody knows about. Will they make a claim on the property or was there a divorce and it wasn’t finalized? And then two people said they were married, living together, does that ex-wife now have claim to the property? So those are all holes in your coverage. You could have, you could have an easement that wasn’t disclosed.
I had a client just bought a house and they were under due diligence. And it was real important to them that they were going to build a swimming pool in the back. And then they found out that there was a power line easement in the backyard. So had they had that not been discovered in the title search, they might have had a claim. So that easement is an encumbrance on the property. Also encroachments, you could have somebody that built a building on the corner of your property that should be discovered under survey, but if you had a dis survey and it wasn’t discovered, then that overlay of the building, that encroachment would be encumbrance on your property. Intelligence insurance company is supposed to defend you against such encumbrances.
You do have some real estate attorneys that are better than others, and you have some that are lazy. So they’ll just look at the last deed and they’ll be like, everything’s fine. And they’re really not going back far enough there should be some clues as to whether or not there’s possible defects or whatever. So it’s very important to have title insurance. And, you know, a lot of the times people are getting a reissue rate. So they’re going to the previous title insurance company. They might want a different title insurance company to look at it because something else might be discovered or figured out. So title insurance’s, very important, highly recommend it.
Speaker 1: Which one of the two do people usually have?
Speaker 2: It all depends on the attorney. I can tell you that if you’re going to buy a house and you’re trying to make it as inexpensive as possible, and you’re looking for the best deal with an attorney, and you’re trying to trim it down, the one way you’ll trim it down is to not have the owner’s coverage included as well. But most of the closing attorneys here are going to provide with both.