The Controversial Ins and Outs of Title Insurance

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Title search is an important part of buying a property as it transfers the ownership in your name. You pay a title search company to dig out the records and make sure there are no liens or judgments against the property. There is another related term called title insurance that protects you against defects in the title not unearthed during title search.

Why pay for both title search as well as title insurance?

As a buyer, you are made to pay for both title search as well as title insurance. This is unjustified and uncalled for as it is the responsibility of the title search company to see to it that no one turns up later to press a claim on the title of the property in the future. You are made to pay twice for the same thing to cover up for any lapses on the part of the title search company, which isn’t fair.

All companies are required to be fully insured when providing a service. Then why are title search companies not made liable for any lapse they commit while performing their job?

There can be many kinds of defects unearthed during title search such as missing heirs, unpaid taxes and utility bills, and liens filed after closing. Just imagine the loss if you are purchasing the property in cash. A defect in the title puts all your hard-earned money at stake just because of a mishap on the part of your title search company.

The connection between title search and insurance companies.

There seems to be a nefarious collusion between title search companies and insurance companies to force buyers to cough up money. Lawmakers need to look into this game where common people are being charged twice for the same job. First buyers are asked to pay for title search and then they are asked to pay for title insurance in case the company missed something during title search.

Lenders want to save their skin.

The real purpose of a title search is to assure the lender there are no defects in the title. They want to save their skin in case of a title defect as they have to stake a lot of their own money. A defect in title becomes more troublesome for lenders if the buyer defaults on his mortgage repayments as the lender finds it difficult to take back control of the property to recover its dues.

If the lender wants to protect itself on account of title defect, shouldn’t you, as a buyer, also demand the same kind of protection? If you are paying for the property, why should you be held responsible for unpaid liens just because your title search company did not perform its job satisfactorily?

Our advice? Find a high-quality closing company that does title search and title insurance for you.