We get it. At closing, it’s easy to get overwhelmed with what seems like a tidal wave of mandatory fees and surcharges. It may even lead you to consider rejecting what you see as “optional” closing costs. However, if you’re thinking about passing on getting an owner’s policy here are a few things to consider.
If you’re purchasing your home with a mortgage, the lender will require the purchase of a lender’s title insurance policy, which protects the amount they lend. It’s important to note that a lender’s policy only protects the lender. Owner’s title insurance provides protection to the homeowner if someone sues and says they have a claim against the home from before the homeowner purchased it. Without an owner’s policy, the substantial investment the buyer is making in the property may still be at risk.
How could this happen, you ask? Well let’s consider the case of Ryan Manning. Ryan was an excited first-time home buyer who bought a home with a deck, shed and big, fenced-in backyard. Or so he thought.
Two years after he bought the property, someone came to his door and informed him that the land his home sat on was one legal parcel of land while his backyard was on another. It turns out the two pieces of land were sold as one when purchased by a couple in 1989.
After the husband died, the wife sold the property, but only the lot with the house was transferred to the new buyer. She subsequently discovered the backyard lot had not been transferred, so she gave it to the new owner. He was the one who was now offering to sell it to Ryan.
Ryan was dumbstruck. He went to the real estate agency who handled the sale. The real estate agency referred Ryan to their lawyers, who told Ryan to take it up with the title insurance company. That’s when the title insurance company informed Ryan that the policy covered the lender, not him. This is where your blood should run cold. This is the type of financially crippling situation that can impact you and your family for the rest of your days.
The good news is you can avoid what happened to Ryan by purchasing an owner’s policy, which will protect you from a wide range of problems that may arise. This includes tax liens, deed errors or omissions, forgery of deed documents, fraud and mistakes in the public record. It also covers you if any previous owners’ unknown heirs show up to make a claim on the property.
So before you skip out on the owner’s policy to save a few bucks, remember what happened to Ryan. Buy an owner’s policy and protect your home, your family and your future.