Title Insurance & Real Estate

One of the most common questions from buyers achieving their dream of homeownership in the U.S. is about title insurance. Unlike monthly car or homeowner’s insurance, title insurance is a legal safeguard that protects the past of your property. Most insurance covers future events, but title insurance protects you against issues hidden in the ownership history of your home.

For example, if the house you purchase turns out to have forged documents, unpaid liens from previous owners, or other legal claims, the financial and legal responsibility could fall entirely on the buyer. Title insurance ensures that the insurance company takes on these risks and resolves any problems that arise. Let’s take a closer look at what title insurance actually does:

1️⃣ Verifies true ownership and prevents fraud.
It confirms that the seller is the legitimate owner and that there are no forged documents or false signatures. If a fraudulent owner appears after closing and claims ownership, the insurance protects the buyer.

2️⃣ Clears any outstanding debts from previous owners.
This includes unpaid property taxes, unpaid contractor bills (mechanic’s liens), or court-ordered claims. If any issues are found, the seller resolves them during escrow to deliver clear ownership to the buyer.

3️⃣ Handles unexpected family disputes.
Unknown heirs, former spouses, or other claimants may appear to challenge ownership. Title insurance covers attorney fees and court costs in these cases, which are more common than many buyers realize.

4️⃣ Corrects errors in public records.
Mistakes in historical documents, such as address errors or notarization mistakes, can cause problems when selling your home. Title insurance identifies and corrects these issues proactively.

5️⃣ Addresses boundary and easement issues.
It checks for possible restrictions on property use, such as a portion of your yard belonging to a neighbor or a utility company having rights to underground pipes.

There are two main types of title insurance in U.S. real estate transactions:

• Owner’s Policy: protects the homeowner.
• Lender’s Policy: protects the lending bank.

If you purchase a home with a mortgage, the lender requires a policy to protect their interest, and the buyer typically also purchases an Owner’s Policy to safeguard their property. This provides comprehensive protection for the buyer at a one-time cost during closing, without any monthly premiums. Coverage lasts for as long as you own the property and even protects your ownership history after selling or passing the property to heirs.

Real estate is one of the largest investments in life, often involving hundreds of thousands or millions of dollars. Protecting your invisible legal rights is crucial. Title insurance is not just a document—it’s a safeguard that protects your family’s home and assets from unforeseen legal disputes. Before signing closing documents, carefully review your title report and consult with your real estate professional or a title expert if anything is unclear.

For questions, please contact: (213) 500-8954

— Michelle Chung, Vice President, Newstar Realty, Los Angeles