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What is Title Insurance and Why Do I Need It?

If you’re buying a home, you’ve probably heard about those pesky “closing costs.”

Some of the smaller ones are pretty minor, such as recording fees and wire fees. The majority of the money you pay in closing costs, however, goes to title insurance. And since you have to pay it, it’s good to know what it is.

Definition of Title Insurance
Title insurance is insurance that protects the owner of a property and the mortgage holder/lender against loss from things that might occur related to the previous owners’ legal ability to sell the property.

In general, title disputes are rare. But because they come up from time to time, even after a thorough title search, the parties involved who have money at stake need to make sure their interests are covered in case a problem arises.

Title insurance pays for legal fees to resolve any legal challenges. Some of the more common ones include:

• Forged titles
• Unpaid overdue taxes
• Heirs who were unknown at the time and later claim ownership
• Errors in filing
• Old/unpaid liens such as contractor bills and HELOCs
• Undocumented easements
• Water rights issues
• Conflicting wills

Types of Title Insurance

There are two types of title insurance:

1) Lender’s title insurance
2) Owner’s title insurance

If you have a loan, your bank will require that you purchase lender’s title insurance to protect it against anything that comes up. The cost depends on the type of property and where it’s located.

As the owner of the property, you can also purchase an owner’s title insurance. Although it’s optional, it’s highly recommended. And actually, it becomes more important the longer you own the property and the more equity you have.

Cost of Title Insurance
Title insurance is dependent upon the purchase price of the property. The total cost per transaction is usually around .05% – 1% of that amount. In Florida, the average cost for title insurance now is $1,100 – $2,200.

When you’re making an offer, you can often negotiate who pays for title insurance. In a buyer’s market, it’s fairly common for the seller to agree to pay for the buyer’s title policy.

Title insurance is a highly regulated industry. You can contact the Florida Department of Insurance with any questions, or give us a call at Titan Title.

We look forward to helping you with your title and escrow needs in Tampa and St. Pete!

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