Liz Halabu Casselman an Attorney and Title Agency Owner has written a great blog about misconceptions regarding title insurance. The title insurance industry, often overshadowed by more visible aspects of real estate, plays a critical role in property transactions. Here are some common misconceptions mentioned in the blog and the realities behind them:
- Misconception 1: Title insurance never pays out.
Reality: The title insurance industry paid $485.2 million in claims during the first nine months of 2023, up from $438.7 million the previous year. This shows that the industry does pay out claims when necessary. - Misconception 2: Title insurance is too expensive and not worth the cost.
Reality: Title insurance and settlement fees typically amount to less than 1% of the total life-of-loan costs for borrowers. The major costs associated with purchasing property are often due to loan-related fees and interest payments to lenders. For cash purchases, title insurance premiums are generally paid by the seller in most states and are less than half a percent of the purchase price. - Misconception 3: Title insurance doesn’t cover real problems.
Reality: Title insurance covers various significant issues such as boundary and survey disputes, easement problems, fraud and forgery, access issues, and liens. While potential claims are addressed at closing, the crucial coverage period is during property ownership, protecting against future issues. - Misconception 4: Title searches are simple and can be automated.
Reality: Despite technological advancements, the title industry relies heavily on skilled professionals who conduct detailed searches and manage complex processes. Human expertise is essential due to the intricacies of real estate transactions, legal requirements, and the potential for human errors in records.
Title insurance is vital for protecting one of the largest financial investments most people make. It offers not only a product but also services that add value and that streamline real estate transactions at competitive prices. Understanding what title insurance covers is crucial for making informed decisions in real estate.
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