What is Title?

What is “title” and why do I need to insure it?

When you buy a piece of land, you don’t get handed the piece of land — you are given title. Title is the owner’s right to possess and use the property. How a home is titled can vary. For example, title might be held as tenants in common, as joint tenants, there may be a right of survivorship, or there might be a life estate in the home. In addition, as you might imagine, there are many uses for land and rights can be given or sold for such uses. Someone other than the person you think of as owner of the property itself may own mineral, air, or utility rights on the property. A bank with a mortgage on the property owns an interest in the property, as does someone who has done work on the house and filed a lien against it. The government may also have liens against the property for unpaid taxes, and the city may have an easement giving it the right to string utility lines across the front yard.

Title is a legal document listing the history of ownership of the home. A title report lists all parties with a legal claim to the property, what items need to be cleared from title before the new buyer can take possession, and if there are any easements or encroachments on the property.

Who pays for Title Insurance?

In the State of Washington, the seller buys title insurance for the buyer and the buyer will buy title insurance for the lender.

Why does my lender need title insurance?

When you get a mortgage to buy a home, you’re making a purchase with borrowed money. Since that money belongs to the lender, the lender has a legal claim, or lien.

If a problem with the title is uncovered, and that problem results in the buyer losing the home, the lender would lose a substantial amount of money. Title insurance protects the lender’s investment in the buyer’s home until the buyer has fully paid off the mortgage.

If my lender has title insurance, why do I need it?

If you lost your home due to a title dispute, your lender’s title insurance would not protect you. You would lose any money you had invested in your home, including your down payment, mortgage payments, and money spent on improvements and repairs. You may even be required to repay the mortgage on the home, despite no longer owning it.

Getting a title insurance policy for yourself will protect you from these losses. It can also cover your legal costs for any disputes that need to be settled in court.

How much does title insurance cost?

That can vary from one deal to the next, but it’s usually one percent of the purchase price, or less. You pay this fee one time, as part of your closing costs.

How do I select a title insurance company?

Often, the seller ends up selecting the title company, since the seller pays for the buyer’s title insurance policy. If the buyer wants to select a different title company, they may need to pay a cancellation fee, or they may be required to pay for their own policy.