Protect Your Investment—The Benefits of Title Insurance and How to Buy It

If you're in the process of buying a new home or investing in real estate, you've likely heard about title insurance. But what exactly is it, and why is it so important, especially in a city like San Diego with its thriving real estate market and numerous real estate agents and realtors?

In this article, we will explore the ins and outs of title insurance, its benefits, and how to purchase it.

What Is Title Insurance?

Title insurance is a specialized form of indemnity insurance designed to safeguard both lenders and homebuyers from financial losses resulting from defects in a property's title. In the world of real estate, having a clear and unencumbered title is essential for any successful transaction.

When you work with San Diego real estate agents and realtors, they understand the importance of ensuring that the property's title is clean.

Before a property's title can be issued, a title company conducts a comprehensive title search to check for any claims or liens against it. This search involves examining public records to determine the property's legal ownership and to identify any claims against it.

A variety of issues can mar a title, including erroneous surveys, unresolved building code violations, back taxes, liens from mortgage loans, home equity lines of credit (HELOCs), and unrecorded easements, to name a few.

Title insurance is unique in that it protects against past occurrences rather than future events. A basic owner's title insurance policy typically covers ownership disputes, incorrect signatures on documents, flawed records, restrictive covenants that can reduce property value or enjoyment, and encumbrances or judgments against the property, such as outstanding lawsuits and liens.

Types of Title Insurance

There are two primary types of title insurance: lender's title insurance and owner's title insurance. Lender's title insurance, often required by lenders, is purchased by the borrower to protect the lender in case the seller was not legally able to transfer ownership rights. It is vital in assuring lenders that their investment is secure.

Owner's title insurance, on the other hand, is typically purchased by the seller to protect the buyer against title defects. While it is optional, it becomes especially important for homeowners as they continue to pay down their mortgages and accumulate a greater equity stake in the property. San Diego real estate transactions can be substantial, so it's wise to protect your investment.

Purchasing Title Insurance

The process of purchasing title insurance is typically initiated by an escrow or closing agent once a property purchase agreement is completed. In San Diego, you have several options when choosing an insurance provider, including major national underwriters like Fidelity National Financial Inc., First American Title Insurance Co., Old Republic National Title Insurance Co., and Stewart Title Guaranty Co, as well as regional title insurance companies.

The cost of owner's title insurance can vary depending on the state, the insurance provider, and the purchase price of your home, ranging from $500 to $3,500. Often, both a lender's policy and an owner's policy are required to ensure comprehensive protection, and these policies are purchased as a one-time fee at the time of closing. The Real Estate Settlement Procedures Act (RESPA) prohibits sellers from mandating a specific title insurance carrier, ensuring transparency and fairness in the process.

Risks of Not Having Title Insurance

The risks of not having title insurance are significant. Imagine the scenario of a homebuyer in San Diego who finds their dream home, only to discover unpaid property taxes from the previous owner after closing. Without title insurance, the financial burden of these unpaid taxes rests solely with the buyer, potentially jeopardizing their new home.

Title insurance provides ongoing protection for as long as you own or have an interest in the property. It also benefits lenders by covering them against unrecorded liens, access rights, and other title defects in the event of a borrower's default. Real estate investors, in particular, should ensure a property's title is clear before making a purchase, as properties in foreclosure may have numerous outstanding issues.

In the competitive San Diego real estate market, ensuring the security of your investment is paramount. Title insurance, whether lender's or owner's, plays a critical role in protecting you from financial losses resulting from title defects, claims, and encumbrances. While lender's title insurance is usually required, owner's title insurance is optional but advisable for long-term homeowners.

Protecting your investment with title insurance ensures that your San Diego real estate journey is a safe and secure one, guided by experienced real estate agents and realtors who prioritize your peace of mind.

How Can I Help You?

Melina Rissone

Having sold properties for more than 17 years and earning various prestigious awards throughout the course of her career, Melina Rissone has more than earned her reputation as one of San Diego's most skilled and trustworthy real estate brokers.

• Coldwell Banker Global Luxury and Institute of Luxury Home Marketing certified.
• Cartus Network Inventory Specialist and Cartus Network Marketing Specialist since 2015.
• RCS-D Designation, a Real Estate Collaboration Specialist for Divorce.
• SRES Certification through NAR is a Seniors Real Estate Specialist certification.
• Melina is bilingual in English and German.
• Recognized as the Top 4% of all real estate brokers in San Diego County in 2021 and the Top 3% of Coldwell Banker International.
• Coldwell Banker Presidents Elite Award.